Being the 25th anniversary, the commentary is expected, but the interesting thing was how many led with headlines about ‘how it could happen again’ and ‘the next one will be bigger’.
Anything’s possible, but what was ignored in all the doom saying was the crash was merely a blip had you been a long term investor.
Author and investment adviser, Garth Turner, was the business editor of the Toronto Sun at the time and made sure his morning after column was accompanied by a picture of breadlines during the great depression.
He was in good company, with newspapers and economists predicting a depression, but it’s something Turner regrets today because it only catered to fear and history proved as much.
Despite the crash the Dow Jones Index actually finished 1987 in positive territory; by January 1988 the S&P 500 was above its January 1987 levels; and by April 1988 the ASX 300 was above where it began 1987.
The interesting thing about 1987 was even a high growth portfolio, comprising 80% equities split between Australian and international shares, still managed a positive return of 3.6% for the calendar year.
And a balanced portfolio, with almost half its weight in equities, achieved a 10.1% return for the year.
Had you remained on course with your investment plan, history revealed you had little to worry about.
Anyone who took notice of the army of economists predicting the end found themselves crystallising a loss and then watching as the markets recovered.
Since January 1988 Australian shares, as measured by the ASX 300 Accumulation index, have returned an annual 9.4%, while a balanced portfolio went on to churn out an annual 8.3%.
Finally, take the example of Bill Gates; 31 year old at the time, after the crash his net worth fell to $945 million, 25 years on and he still managed alright!
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re the best financial adviser in Australia.
