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Market Volatility

During times of persistent or extreme market volatility, the advisers at Continuum Financial Planners Pty Ltd are mindful of the effect that has on clients – and of course, on client portfolios.

Investors – those who participate in markets for the long term – become familiar with the price volatility (valuation rises and falls) and learn to not panic. Traders/ speculators and media vendors, like to make as much noise as possible during these times because of the personal gains they facilitate: traders and speculators by selling/ buying on the dips; media vendors by selling more of their ‘news’.

In August 2011 (a period of market volatility while the horrors of the GFC were still fresh in people’s minds), we sent the following message to our investor clients:

“While you were sleeping, the ratings agencies threatened a downgrade of the credit rating for France; the USA Super Committee found deadlock (i.e., couldn’t make a decision about cutting costs and raising revenue to turn the tide of debt for that country) – and market traders have capitalised on the bad news and driven market prices lower.

The Australian market will most likely open lower today and with our government focused political point-scoring (introducing new taxes; and insisting on a 2012/13 budget surplus) it is likely to stay down during the day.

Your adviser at Continuum Financial Planners is watching developments – and we are reviewing any investment portfolios that might be put at some risk in this situation. Most will be OK, but any with margin loans are under our particular watch. We will be in direct contact with any clients who will be affected by the current downswing.

As you will now be familiar, it is our consistent contention that if you are invested in accordance with a strategy that has been formulated for your circumstances, time in this market will ultimately yield its rewards. We also watch the risk profile of client portfolios and advise when appropriate, any necessary change: today would not be an appropriate day to convert invested funds back to cash unless there is an absolute need!

It is our view that the current spate of market volatility is more influenced by market sentiment than by economic fundamentals: and as we have previously noted, these times of deep panic are potential buying signals. Where your position is such that investment would be beneficial to your strategic, long-term goals, we will be in direct contact with you once we are satisfied that a ‘bottom’ has been found.

In the meantime, if you have any concerns, use the usual methods to contact your adviser – including email, phone 07 3421 3456, or the online Contact Us facility.”

Our team of advisers and client service practitioners are consistent in our enthusiasm for the wealth management role we have with our clients: we look forward to being of service to you – and to friends or family whom you refer to us – in the developing and ongoing review of personal strategies to achieve personal financial goals and objectives. To arrange a meeting with one of our team, use the links above.

(The italicised quote above was published as a post in August 2011: it has been refreshed in April 2021)

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