The short answer is no. The longer answer would be:
In times of market volatility (nervousness and high emotion) it’s often good to reflect and put things in context. In Nov 2007, the Australian share market was at its all-time high. In 2009 it fell 54%. Since then, the ASX200 returned to almost 6000,recouping almost 80% of the lost ground. Today the Australian share market currently sits around the 5000 mark.
Ok, so what does it all mean and what do I have to do? The answer is not much, except remembering the conversations about investing with your financial planner.
These ups and downs (or the volatility as the experts call it) are absolutely normal. They’re organic and we want them to happen. If we didn’t want this volatility in the first place, we’d simply always keep your money in cash. But that wouldn’t be that great either as after inflation there would be nothing left. Therefore, the volatility is good! It's there for the same reason as the premium returns we get from investing in great businesses in Australia and overseas (also called shares). We have to accept it and appreciate it.
For those people in accumulation phase, still working and contributing into super/investments (let’s call this group – the buyers) this presents a great value opportunity to accumulate more at attractive prices. Just picture going to a fruit market, having same amount of money in your pocket as yesterday and seeing lower prices. As a buyer, you're getting more value for your money. Happy days.
For those people who finished investing new money - in retirement phase (let’s call this group – the receivers) - we need to remember that the income they receive from their portfolio is not paid based on its value (or what the portfolio is worth) but the number of units they hold. And although the volatility impacts on the first, it doesn't have any impact on the latter.
It also highlights the importance of maintaining cash (one or two years’ worth) in your retirement income portfolios to help weather the volatility and not forcing you to sell.
Finally, the share market, just like us, is emotional. There are no good or bad markets. There’s just the market. And Mr Market has a bad temper sometimes. The best we can do is to leave him alone and not try to control it. Or as your financial coach will always tell you, let’s take a step back and think about why we're investing in the first place. This is the main reason you hired them - to put things in perspective and to stop you from making bad decisions with your money.
Still have some questions?
If you want to discuss your investment strategy with one of our advisors. Call us to arrange an appointment on 02 9328 0876.
Article by Michal Bodi | Senior Financial Planner
General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.