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Long Term Investing

Consider your long term investment strategy, do not be frightened

Nathan Lear
Partner/Private Client Adviser
20 Jul 2015

As a result of the economic situation in Greece and the Chinese sharemarket freefall, shockwaves have been felt throughout global markets including the Australian sharemarket, which has fallen close to 10 per cent from highs earlier this year. 

Over the past few weeks, the Shanghai Composite index has fallen by around 28 per cent from its June 2015 high. The following graph illustrates the fall.


However it also highlights that over the previous 12 months, the Shanghai Composite index has appreciated close to 150 per cent. To put this in perspective, the recent falls have only brought this index back to levels seen in March of this year.

Australia does not have large amounts of investment in the Chinese stock market, or the property market, therefore falls in their sharemarket should not have a significant effect on us. However there could be short term volatility – we are already seeing flow on effects to commodity prices in Australia. The iron ore price last week fell to below $50, putting the share prices of our biggest miners, namely BHP Billiton and Rio Tinto under pressure.

In order to stem the falls, the Chinese government has been implementing several policy measures in an attempt to support share prices. And while the Chinese sharemarket has seen a big sell off, China’s Gross Domestic Product (GDP) growth seems to be on track at around 7 per cent per annum.

So what does the recent volatility in Chinese stocks mean for Australian investors?

These type of market events can often frighten investors. My advice is that investors refrain from making any rushed decisions and instead consider their long term strategy, ensuring it is on target to meet their long-term goals and objectives. It is unwise, and can be dangerous, for retail investors to make significant changes to their long term investment strategies based on short term macro-economic events.

If investors do however decide to make changes to their portfolio, it should be done after careful consideration and consultation with a trusted adviser, rather than relying on media headlines. 

I suggest investors take a leaf out of Warren Buffet’s book, and “Be fearful when others are greedy and greedy when others are fearful”.

As always, Hewison Private Wealth recommends that our clients take a long term investment approach and do not make any investment decisions based on short term macro-economic events.

The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information. 

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.