February 2016 Market Volatility Update

Back in August 2015 we posted an update on the volatility local and global share markets were experiencing (you can read that update here).

Since that update in August, if you only paid attention to the media you could be forgiven for thinking that things have significantly deteriorated further. The reality it seems is much different.

The chart below of the All Ordinaries Index over the last 5 years shows what the media has chosen to ignore – the upside volatility!

Even with a shorter term view, the All Ordinaries index remains at similar levels to 6 months ago.

Focusing on short term downside volatility is the domain of the media and the day traders.  We wish them well.

Strangely, during this latest period of volatility we haven’t seen the following headlines when markets rebound:

“5th biggest one day gain since 2011”

“Market adds $32 billion to Australian investor’s wealth in one day!”

Many themes which we discussed in our August 2015 update seem to playing out as we suggested and this does not cause us to change to our approach.

As always, we will ignore the daily noise and concentrate on whether your investments are good value on a long term basis.   Currently we see good value in Australian shares – the average dividend yield alone at over 6% dwarfs the returns available from cash and term deposits.  Even if shares continue to go sideways they will give returns more than double those of cash and fixed interest.  Volatility and noise aside, it is definitely a time to remain fully invested.

If you want to discuss any of this further, please contact your adviser.

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