Shares - Should You Join The Panic?
Released: 08 Nov 2011
While the severity of recent global stockmarket events cannot be understated, it is important to retain some rationality. “Billions Wiped Off Sharemarkets”, “Stocks Plunge On Fears Of Global Turmoil” and even “Bloodbath” are among headlines seen in recent weeks. The standard photo of a Wall Street trader with his head in his hands pops on the front pages of various publications. When markets inevitably rally a few days later, I always look to see the “Billions Added to Sharemarkets” headline, but alas, I’ve never seen it. It obviously lacks the drama!
A decision to join the many shareholders who sell their shares during these panic-driven frenzies should not be made lightly. Humans are impulsive, and people’s best laid plans are in danger of being thrown out the window if they act at the first sign of sharemarket weakness.
US Recession, US Ratings Downgrade, European Debt – whatever the reason, it is important to remember that the market corrections associated with these events, like the dotcom bubble of the early 2000s, September 11 and the 1987 stockmarket crash, are likely to be only temporary and in each case, global stockmarkets recovered and achieved new highs.
With current events following on from the Global Financial Crisis, it seems that this “bear market” has lasted for longer than usual, with months (or even years) where it feels like the market has gone nowhere.
Most investors hold shares, or have shares in their super fund, as part of a long term investment strategy. These events provide distractions to this strategy, but should not fundamentally alter it. I don’t completely advocate a “do nothing, ride it out” strategy, however if you hold quality Australian Shares in companies that are continuing to grow and pay strong dividends, it may pay to consider your overall position carefully before joining the “panic sellers”.
I can help you review your shares and investments and ensure they are suitable for you. Please contact me on (08) 8333 2488.
Scott Keeley
The information provided above is for general information purposes only and has been prepared without consideration of the relevant personal circumstances of any individual investor. You should consult with your financial adviser before acting on the information.