Michael has decided to stick with his investment strategy even though current volatility is on his mind. Find out what Mark, a Gold Coast adviser, thinks about his decision.
When markets are volatile it can
be tempting to ditch your growth
strategy. It’s a natural reaction, and
one that often afflicts even the most
experienced of investors. Fortunately,
there is now a wealth of information
available to help people make more
considered investment decisions. One
of our members, 28-year-old auto
electrician Michael, tells his story.
“When I saw what was happening in the share market, my initial reaction was to move to cash,” says Michael. “But when I went back to the information booklet for my super plan, I realised that in the long-term, I was better off staying with my growth portfolio.”
Michael describes his investment experience as “limited”, so he actively seeks out other information. “I read quite a few articles in newspapers and they also said you have to sit tight and take the long-term view. Of course, I still feel nervous when the market has a bad day, but I remind myself that I have another 30 years before retirement, and I want to be in a position to benefit from the recovery.”
"Investors have to
remember that shares are
a long-term investment.
You are going to have
good years and you are
going to have bad years,
and it is essential that
investors ignore the more
Goldhurst Wealth Management
Michael is also taking advantage of the lower share prices. “At the moment it’s just employer contributions that are going into my superannuation fund, but I’m adding shares to my non-super investment portfolio as well.”
Mark Lonergan, a director of Brisbane-based firm Goldhurst Wealth Management, endorses the approach taken by Michael. “Investors have to remember that shares are a long-term investment. You are going to have good years and you are going to have bad years, and it is essential that investors ignore the more sensational reporting,” says Lonergan.
“We have no control over what is happening in investment markets, but we do have control over our behaviour. Michael shows how taking a long-term perspective can lead to a more sound decision. However, focusing on the long term isn’t just for the young investor.”
When you consider that life expectancy for a 60-year-old male is 21 years, it’s important that retirees, or those close to retirement, put negative returns into perspective as moving from shares into cash is simply going to crystallise your losses and remove the opportunity to benefit from the inevitable upswing.”
“If you have a good diversified portfolio and you stay invested, any downturn will blow over,” adds Lonergan. Successful investors stay invested through these periods.”
These are broad issues to consider, and it’s worth emphasising again that everyone is different. “Michael has shown he can live with market volatility,” concludes Mark Lonergan, “but other people will lose sleep over it. It’s important to understand your real tolerance of investment risk.”