We are all familiar with the guru Warren Buffett’s advice to be fearful when others are greedy and greedy when others are fearful. But as our investments decline in value, as they have over the past month, it can be very difficult to feel greedy when others are fearful!
Before making buying or selling decisions it is important to comprehend the reasons behind this latest share market volatility.
The trigger to this decline in the share market was the decline in the Chinese Stock market by 8.5 per cent on August 24.
The central theme around this sell off was the Chinese economy was perceived to be slowing down. After climbing 150 per cent in the year to June, it was clear to many investors that these type of returns were no longer sustainable and a correction was imminent.
The Shanghai market at the time of writing had fallen by about 40 per cent but it was still up by 30% on a year ago.
The general consensus among commentators is that the local share market is experiencing a correction not a crash. Our share market is not considered to be over valued and the outlook for the Australian economy is considered to be fundamentally sound.
When we invest in shares we are investing in companies, the critical factor is the earning of these companies. In the recent annual reporting season there were few nasty surprises. A reflection of this is the fact that dividends paid by Australian companies have increased by, on average, 8 per cent.
If you would like further information on your investment strategy, please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.