Are we heading into another financial meltdown - I'm worried - I have more than half my hard earned $2M portfolio in stocks and managed funds and I'm heading into retirement. I'm still 30% down from 2008. My banking friend thinks there will be another GFC bigger than the first and paraphrasing here, "the developed economies are in so much debt and the governments cannot provide bail outs next time round". What should I do? He reminds me of the Great Depression where it took 30 years for the stock market to get back to same point from its high. I don't want to sit all my money in cash, but I don't want to go through another GFC and see all that whittled away to nothing...
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The concerns outlined above are not unique, or unreasonable. With every month that goes by there seems to be another issue to worry about with the state of world markets. Unfortunately the negative sentiment is amplified by the unending “noise” that is synonymous with the short term nature of the news media. In a world where bad news sells, we are unlikely to hear of any positives when it comes to market rebounds or the millions that the share market grows by when these occur.
Just this year we have seen the media initially focus on the US which was supposed to commence the long awaited debt driven melt down; in the middle of this, a government shutdown once the debt ceiling was breached was next seen as the factor to blow the economy apart. When neither eventuated focus moved next to the debt woes in Greece, the slowing growth in China, then to heightened tensions on the Korean peninsula, then low growth in the developing world and now finally we’re back to the US and the impact that raising interest rates will have on the “green shoots” of the economy. It’s hard to believe, but we have had to endure all of these impacts on sentiment over the space of just one year. Roll on 2016!
The truth is, there are always things to be concerned about, important and in no way trivial things. There always has been. Our approach always has been to take a lot of time initially understanding your life goals and objectives and why these are important to you and how your investments fit. Key among this is to understand your investment preferences and aversions, your investment timeframe and tolerance for investment risk. If our strategy has been prepared with all of these factors considered, we can then take the “long view”; risks can be mitigated through the appropriate use of dynamic asset allocation and capital protection strategies keeping the initial objectives at the forefront of our thinking as time passes.
Dislocation in world financial markets is inevitable, we’ve seen it before and we will no doubt see it again. Given this, the “Long Game” can be incredibly difficult to play on your own. The real value of your adviser is determined through these difficult times; the real value is in keeping you on track to the initial plan, helping you avoid making rash decisions and guiding your choices as your personal and financial needs change across all market cycles.
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