What Panic Costs
Oil is over US$100, bond yields are at a three-year high and your super balance has gone backwards for a month. Here is what forty-two years of Australian market history says about what to do next.
Where things stand
The market is having a rough few weeks
Unpleasant to watch, and entirely ordinary. The market has fallen more than 10% from a high in many separate episodes since 1984 and finished higher after every one. Below is every calendar year since 1985: the bar is the year’s return, the dot underneath is the worst point it hit along the way.
The long view
Every crisis looked like the end at the time
$10,000 invested in August 1984, dividends reinvested, through every crash, recession, war and pandemic since. Click any marker to zoom into that episode.
Every fall of 10% or more, and how long it took to get back
| What happened | Fall | Months falling | Months to recover | Back to even |
|---|
The headlines
What happened after the news that scared everyone
Each row is a day that led the front page. The columns are what Australian shares did from that day forward.
| The day | Date | 1 month | 3 months | 6 months | 1 year | 3 years | 5 years |
|---|
Put your own numbers in
What moving to cash would cost you
The first two run on real daily market data. The third projects your own balance forward.
Stayed invested
Missed the best days
The difference
General advice only. An illustration of past market data, not a recommendation. Past performance is not a reliable indicator of future performance.
Never sold
Cash, then back in
Never went back
General advice only. An illustration of past market data, not a recommendation. Past performance is not a reliable indicator of future performance.
General advice only. This projection is an illustration built on assumptions you chose. It is not a forecast, not a recommendation, and takes no account of your objectives, situation or needs. Your actual outcome will differ. Past performance is not a reliable indicator of future performance.
Stayed the course
Moved to cash and back
What it cost you
Why a handful of days does that much damage
Getting out is the easy half. Getting back in has to be done in the week the news is at its worst, which is the week you least feel like it.
One fall, close up
Every fall feels different and follows the same shape
The markers are the dates the market actually crossed each level. The words are the feeling that goes with it.
Time in the market
Holding on is what turns risk into return
Every possible holding period since 1984, measured daily. The bars are how often you would have finished with less than you started. They run out.
The full table, including the best and worst outcome for each period
| If you held for | Lost money | Made money | Best | Worst | Periods measured |
|---|
What we do about it
None of this means doing nothing
Staying the course is not sitting still. Volatility is when the useful work gets done, and most of it is unglamorous.
- Your cash and income are already set aside. If you are drawing a pension, the next stretch of payments is not in shares. That is what lets the growth assets be left alone.
- We rebalance into the fall. Bringing a drifted portfolio back to its targets mechanically buys what has fallen.
- Contributions keep buying. Every dollar going in during a fall buys more units than it did at the high.
- We look at tax while prices are low. Falls create opportunities a market peak does not.
- We check the plan, not the price. The question is whether anything has changed about when you need the money.
If this stretch is keeping you up at night, that is worth a conversation. Not to change the portfolio, necessarily, but to be sure the plan still fits.
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