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Sharemarket Volatility
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Blog | Sharemarket investing is a long term strategy

Chris Morcom
Partner/Private Client Adviser
12 Mar 2020

The current volatility in share markets is a reminder that investing in shares is a longer-term strategy.  But that volatility does not mean there aren’t positives to be gained.  Taking a long-term view allows investors to focus on the dividend cash flow their investments provide, as well as the gradual growth in value of their share portfolio. 

The graphic below illustrates the returns of the Australian All Ordinaries Accumulation Index over the past 120 years to the end of 2019 – this index includes the reinvestment of dividends.  Over that time, returns have been negative 19% for 23 years, but have been positive for 81% or 97 years.  The average return over the 120-year period has been 13.1%. 

**Data courtesy MarketIndex.com.au – Original concept by AXA (“109 years of Australian sharemarket returns”) 

Of course, this is easy to say when we have seen the Australian share market indices fall by over 20% in the past few weeks. 

The exposure to share markets in a portfolio is only part of a diverse investment strategy, and the diversification of investment across other less volatile asset classes can shield an investor from some of the volatility of shares. This is where working with a skilled financial adviser can be most beneficial.

When markets fall quickly as they have recently, it often provides an opportunity to rebalance a diverse portfolio back to its target spread of assets. 

This allows investors to buy assets at an attractive price and then benefit when markets recover.  In the meantime, investors benefit from the steady flow of income from their portfolio. 

While share market volatility can be disconcerting, it does not cause for alarm…but it can provide investors with the opportunity to actively manage their portfolio for a longer-term benefit. 

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.