Five lessons from market falls

Recently, we’ve seen some spectacular dips in the Australian share market that have tested many investors.

In times like these, it is crucial to maintain your focus on long-term investing.

Here are five lessons investors can take from the volatile times:

1. Block out the noise
Bad news sells and media hype feeds investor unease. Our advice? Stick your fingers in your ears and say ‘la la la’ at the top of your voice.

When you pay too much attention to market events, it’s tempting to make knee-jerk decisions. This is often the worst thing you can do.

2. Make tweaks – not wholesale changes
When the market dips, it’s an opportunity to review your asset allocation.

It may be a good idea to rebalance your portfolio to your original risk profile but avoid making wholesale changes that involve moving large investments around – and consider seeking professional advice before you do anything.

3. Keep an eye on your income
If you’re retired, income in your portfolio plays a critical role. To boost your income, some retirees have been forced to sell their shares in falling markets.

Make sure you have enough liquidity in your portfolio that you don’t have to resort to an asset ‘fire sale’.

4. Look at dollar-cost averaging
Making regular investments over a period of time can help you avoid extreme portfolio movements that come from market dips.

You don’t need to invest all your income at one time.

5. Old rules still apply – diversify
One of the most fundament rules to investing is diversification.

Avoid having a concentration in one asset or to one asset class.

Diversification is one of the few investment rules that people really need to follow, yet it is surprising that many people don't do it. 

Call a Quadrant financial expert on 1800 222 209 for advice on your super and retirement.

Free seminar: retirement planning in a rollercoaster market

Where do you think you sit?
Even in a volatile market, you have options and opportunities to create a comfortable retirement. If you’re feeling uncertain about retirement, book your seat to our free seminar.

Three experts = the whole retirement picture
We bring three experts together, to give you the complete retirement planning picture.

The money expert – keeping your money safe in a turbulent market
The Centrelink expert – maximising your entitlements
The lifestyle expert – adjusting to retirement and planning your lifestyle

Book your seat at our free retirement seminar to:

• take control of your super in such turbulent times
• set retirement goals and work out if you’re on track to reach them
• find out how a transition to retirement could work for you
• make sure you don’t miss out on any entitlements
• feel confident about your future.

Join us on 25 October from 6 to 8.30pm at the Henry Jones Art Hotel. Call Emma on 6230 6999 or email us at contact@quadrantsuper.com.au to book your seat.

Staying calm in volatile times

A plate of cupcakes toppling all over the floor. The wrong document being fed through the shredder. A train wreck right before your eyes...

Let’s face it, when things go pear-shaped, it’s nearly impossible to stand still and do nothing.

When the share market becomes volatile, as it has been in recent times, many of us, understandably, feel a hard-to-resist urge to take some sort of decisive action. Watching the market fall while you’re just twiddling your thumbs can feel counterintuitive. Unfortunately, this burn to act often leads to hasty, poorly-informed and emotionally-driven decisions that can lock in losses rather than protect capital.

Fortunately, if you’re facing that urge to do something in response to the recent market volatility, there are some actions you can take that don’t necessarily involve locking in losses:

• talk to your financial planner about your long-term asset allocation, your risk tolerance and whether you should rebalance your portfolio
• review the tax-efficiency of your investment portfolio
• check that you’re not paying unnecessary fees.

The midst of volatility is not the time to do something rash – it is the right time to keep a cool head, refocus on your long-term investment goals and to make plans about how you’re going to reach them.

What exactly does global debt mean?

Global debt has been a hot topic lately. But what does it actually mean?

Let’s take a step back – national debt means how much money a country owes to other countries or to private banks. Global debt is the total of individual national debts.

All the publicity about global debt leaves Australians feeling worried about world finance. People who feel insecure  about money don’t spend money, and may even pull their money out of the stock market. The Australian economy can’t grow unless people spend, and the stock market will fall if people start to pull out. This creates a cycle of more economic instability and more public concern.

The billions of dollars that Australia owes can seem like a lot but you need to keep the debt in perspective. To give you some idea of where Australia sits here’s a list of some OECD nations and their current ratio of debt to GDP (the higher the number is, the worse the problem is):

• Japan – 220.3%

• Italy – 119.0%

• USA – 91.6%

• Canada – 84.0%

• France – 81.8%

• Australia – 22.3%

The Reserve Bank of Australia (RBA) says we are at a ‘pretty good starting point’ to face the uncertain global economic conditions.

RBA governor Glenn Stevens says, ‘Our banks are strong, our currency is sound and our sovereign credit position is in the international top tier.

‘Consumer caution, while making life hard for the retail sector, is also building resilience in household balance sheets.

‘If we are entering another period of weaker international conditions, this is a pretty good starting point from which to do so.’

What the market volatility means for you

You can’t help but have noticed the ups and downs of the market over the past few weeks. But what does this mean for you?

For most people, it’s best to sit tight and stay focused on your long-term plans. Switching to a lower risk option locks in your losses and leaves you a lower chance of recovery once the markets bounce back.

For more information, read the market update recently issued by Quadrant Super CEO, Wayne Davy.

If you have questions or concerns about how the market volatility affects you, speak to one of our financial experts on 1800 222 209.