Number-crunchers have put some perspective on the recent Australian stock market volatility to calm investors.
Alarming sub-prime and credit crises headlines may turn investors into avid stock-watchers, according to Perennial Investment Partners head of retail funds management Brian Thomas.
"If you panicked on August 17 and withdrew from the market, you would have missed the biggest weekly surge in over 32 years the very next week with Australian shares up 7.4 per cent for the week ending August 24," Thomas said.
To put some perspective on the current volatility, Thomas looked back to 1988 at the Australian Sharemarket All Ordinaries Accumulation Index.
Of the 4957 trading days between August 26, 2007, and August 27, 1988, only 55 per cent saw positive or equal market returns.
Perennial compared the compound annual growth rate over the past 19 years of the UBS Bank Bill Index and the All Ordinaries Accumulation Index, 5.64 per cent and 11.69 per cent respectively.
He found if just 27 of the best trading days were taken away, the All Ordinaries Accumulation Index return would be reduced to the same as the cash return.
"The bottom line is, if you focus on the short term you could easily lose the nerve to be invested in growth assets, which could greatly deplete your long term wealth as it is indeed true that over the longer term, diversified growth assets will outperform diversified defensive assets," Thomas said.
Sunshine Coast-based Universal Financial Solutions financial planner Warrick Bidwell said: "I haven't had a single phone call about the troubled markets.
"Our clients understand that there's more to achieving their goals than just getting a good investment return."
Bidwell uses Matrix Planning Solution's Prospera software, which promotes cash-flow management and budgeting to achieve life goals.
