Global Financial Crisis – A Decade On

Posted by: In: Blog 23 Nov 2017 Comments: 0 Tags: ,

It has now been 10 years since we experienced the global financial crisis (GFC) and on this anniversary it is prudent to address what occurred 10 years ago and what we have learnt from it.

One lesson learnt was that those investors who redeemed all their investments and moved to cash after the falls, as the pain was too unbearable, probably had the worst experience. Because it is almost impossible to time the market, those investors in the main then missed out on the market rebound in 2009.

With the markets having risen considerably in recent times and especially the US market at an all time high, there’s no shortage of commentary suggesting that investors should avoid another possible market crash.

But as we have stated here on other occasions, achieving your retirement and/or investment goals by buying and selling at the right time is a very inexact science – if not impossible.

What has stood the test of time is that a more disciplined approach to your asset allocation that matches those goals is a far better approach. The chart below highlights how shares and bonds – the two principal asset classes have moved over the past 20 years.

Courtesy Franklin Templeton

In each year, there is a winner and one who has a lesser performance.

What this does tell us more importantly, is that you must ensure your agreed set of asset allocation in each of those assets is maintained.

When stocks or bonds rise above their set allocation levels during bull markets, it may be necessary to pare some back by rebalancing. During those times, we believe it’s important to remember that investing isn’t purely about returns; it’s also important to maintain a portfolio with the appropriate risk level for one’s long-term investment goals—not putting too many eggs in one basket, so to speak.

This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider you financial situation and needs before making any decisions based on this information.

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