Page 2 - Wall Street hammered! What now

The price of admission

We often hear that risk is related to volatility. This is debatable because it can be easily
postulated that volatility is not risk rather it is the price of admission that an investor is
required to pay over the long term in exchange for access to one of the best wealth
building tools in the world.

Risk, on the other hand, can be more accurately seen as the risk of permanent loss of
capital. And with that definition in mind, we are better able to successfully navigate
frequent market corrections and multiple share market crashes.

History does not repeat itself – but it does rhyme

During the GFC, many would lose a lot of money as they sold assets as they, and the wider
markets panicked. However, for those that could choose patience, the experience would
have been very different.

The American stockmarket is currently 423% higher than the level it was the day before
the Lehman Brothers bankruptcy.

And it wasn’t just the GFC that investors had to sit through during this period.

The COVID pandemic was also another turbulent period.

In fact, COVID was arguably more volatile than the GFC. In fact, there were at least 13
trading days where the American stock market either rose or fell by more than 5% in a
single day, which included a day in March where the index fell by almost 12% in a single
day.

Now that definitely is volatility.

What do the numbers say?

Granted, large movements are not very common.

Over the last ten years, over a total of 2,522 days, there have only been 156 days where
the market has increased or decreased by 2.5% or more.

P (08) 9207 3844
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E clientservices@fwplanners.com.au
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Osborne Park WA 6017

Future Wealth Planners Pty Ltd is a Corporate Authorised Representative (325961) of Sentry Advice Pty Ltd (AFSL 227748, ABN: 77103642888