Lesson in turbulent markets: This too shall pass

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Michael YardneyLesson in turbulent markets: This too shall pass –  By Michael Yardney

While we’re in uncharted territory in our financial markets and many investors are confused and concerned; older and more experienced investors have lived through similar times before.

If you look back over the last decade, we’ve had the introduction of CGT, the dot-com stock market crash, September 11th, gone to war overseas, a change of government, periods of high interest rates and low interest rates, the GFC and a myriad other factors out of our control that seemed scary at the time and created uncertainty for our investments.

The big lesson is: “This too shall pass.”

Unfortunately these problems will not go away quickly, and we are entering new era in the financial markets. But this is not a time to panic or make rash emotional decisions. It is a time to learn from history.

You just have to look back a few years to the correction after the GFC when local share prices plummeted 50%, but the peak-to-trough fall in Australian home values was just 3 to 4%.

Compared with shares, property performed very well.

It was much the same in 1987, when the share market crashed and property values languished for a while before property boom that created fortunes.

This as also true after the dot-com boom collapsed into what became known as the “tech-wreck” in 2001. Many investors will remember the property boom of 2001-03 while others will remember how are property markets boomed after the Asian stock market crisis of the mid 1990’s.

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There’s no denying that things are probably going to get worse before they get better.

However, if history repeats itself, as it surely will, while the majority of Australians will sit on the sidelines feeling sorry for themselves, successful investors are looking for and buying investment opportunities created by the change.

All this is part of the economic cycle. This is a time for cleaning up the excesses of the past and getting our financial houses in order to move on to the next stage of the economic cycle, which is the recovery phase.

I’ve found that when things are bad people believe they’re going to be bad forever and when things are good, people forget the bad times ever existed and think that things are going to remain good forever.

Neither case is true!

Remember that when things are bad, they’re never as bad as they seem and when they’re good, they’re never as good as they seem. And in reality, it’s primarily human nature that dictates economic and/or market booms and busts.

What this means is that to protect your assets and be a successful property investor over the next few years, it is very likely you are going to need to take a different approach to the one you took over the last few years.

Some readers will definitely need to do different things to protect their current property portfolio.

As always, some people will thrive not just survive in these difficult times.

Michael Yardney is the director of Metropole Property Investment Strategists , a best-selling author and one of Australia’s leading experts in wealth creation through property. He also writes the Property Investment Update blog.



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If you intend to rely on any of the information in this document to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, you should request advice from a registered tax agent. This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. The information contained in this document is given in good faith and is believed to be correct at the time of publication, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by Chan & Naylor, its officers, employees, directors or agents.

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