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Education and Investment
In a volatile market, it can pay to weather the storm
Long-term investing usually means experiencing a range of investment outcomes – from thrilling highs to disheartening lows. But the good news is, riding out a highly volatile market where prices fall can bring future rewards.
The upside of a market downturn
While the 2022 financial year saw investment markets challenged by several downward pressures, including:
the ongoing impacts from the Covid-19 global pandemic;
geopolitical events such as the Russia/ Ukraine conflict;
a sharp increase in global inflationary pressures;
developed market Central Banks increasing official interest rates more aggressively than anticipated;
supply chain disruptions; and
interruptions to energy and food commodity supplies.
It is reassuring to know that while conditions might still get worse, eventually they are likely to get better. So while its natural to feel confident during periods of high returns and nervous, or even fearful, when markets fall as they have been lately (which for many may feel like being on a rollercoaster), we can take some comfort from looking at long-term performance trends.
All Ordinaries (XAO) performance tells a story
Throughout its history the XAO, which is a market barometer for Australian stocks based on the 500 largest Australian Stock Exchange (ASX) listed companies, has weathered frequent market downturns and recoveries. From the Black Monday crash of 1987 through to the more recent Global Financial Crisis and Covid 19 pandemic, there’s been one constant: every time the markets been knocked down, its’ gotten back up again.
Take the past decade as an example. The chart below shows XAO performance over a ten-year period to August 2022. So despite the instances of short-term volatility, including some sharp drops, values have grown steadily over the long-term.
All Ordinaries Chart
image source: www.marketindex.com.au/all-ordinaries
Our investment experts are looking out for you
While nobody can predict with absolute certainty when a market will fall or pick back up, having a long-term time horizon and using professional managers who are experienced in making the most of the peaks and troughs can, depending on your personal circumstances, work well for you.
That’s why Futurity provides access to a range of investment options, managers and product features. Whether you want the convenience of a long-term set-and-forget investment, or you’d prefer to tailor and manage your investment in a way that suits you, you can rest assured knowing there are experts behind the scenes analysing the market and working hard to get the best outcomes based on prevailing conditions.
Take stock before switching investment options
It can be tempting to sell out of the market when a downturn hits and prices fall. But cutting your losses can also mean cutting off any future gains.
Before taking action, ask yourself a couple of questions.
1. Can you “weather the storm”?
With enough time, staying put through periods of short-term volatility generally leads to a pattern of stable long-term growth. So it’s important to consider your investment time horizon as well as your current financial needs.
For a life-long pursuit like education, funding needs can stretch over decades. From kindergarten through to tertiary education and everything in between, it’s one of our biggest long-term investments.
2. If you sell when the market is low, will you miss out when it recovers?
Selling during an investment market downturn can be tempting for investors hoping to avoid a further drop. But it can also mean missing out on the upside of any turnaround.
TIP: Rather than reacting to market volatility, take some time to reflect on your investment strategy and seek help from an accredited Financial Adviser.
We’re with you throughout your long-term investment in education.
Futurity is here to support you. Whether the market’s up or down, our goal is to offer investment products designed to support life-long education journeys.
If you have questions about how we can help you, speak with your Financial Adviser about Futurity’s Education Bond range or get in touch with Futurity Investment Group directly.