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Key points to remember during times of volatility

Posted on 3 March 2020 |

Financial Planning

As you are no doubt aware, the markets have experienced a correction over the past week which has resulted in a 10%+ decline in the ASX 200. I wanted to write to you to give you some context around this, Corona Virus and our take on what to expect in the markets moving forward.

Key points for you to remember during times of volatility:
  • Corrections are a normal part of investing – particularly after a very strong period of growth as we have seen over the past 12 months
  • Selling shares after a fall will lock in a loss
  • Market drops such as this provide an opportunity for you to invest in the market at a cheaper rate
  • Dividends remain smooth

I strongly recommend you try to ‘turn down the noise’ to avoid getting thrown off your long term investment strategy.

Historically markets have experienced market corrections periodically and whilst they are often triggered by different events, corrections such as we have seen are healthy and normal. Of course no-one likes to see the value of their investments decline, but as the following charts indicate, this is all part of the investment cycle.

And over the long term, markets continue to grow as they climb the ‘wall of worry’:

As noted by Dr Shane Oliver, Chief Economist for AMP Capital – “Bouts of volatility are the price we pay for the higher longer-term returns from shares.”

Fortunately we have a robust investment strategy in place for our clients which prevents the need to sell your investments at times such as this as we have your reserves portfolio in place to cover your income requirements for 3+ years. Now is not the time to ‘panic and sell’. As investment guru Warren Buffet is quoted as saying: “Be fearful when others are greedy. Be greedy when others are fearful.” And at the end of the day despite the correction, your investments have still experienced growth.

I trust the above brief note has allayed some of your concerns. Of course, please do not hesitate to contact us directly at (02) 9357 2700 for a chat about your individual portfolio and circumstances. We are here to support you.

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