Worst Per­form­ers

Sunday Mail - - SPORT -

Regis Res ................. -7.36% Green­cross Ltd ........ -7.25% CSR Lim­ited ............ -6.44% Galaxy Res .............. -6.03% Domi­nos Pizza ......... -5.52% G8 Ed­u­ca­tion .......... -5.50% AMP Ltd .................. -4.84% Res­o­lute ................. -4.80% Nanoson­ics Ltd ....... -4.76% Bega Cheese ............ -4.35% EX­ACTLY 10 years ago the col­lapse of US bank­ing gi­ant Lehman Brothers helped send the world spi­ralling deep into the global fi­nan­cial cri­sis.

Lehman, the big­gest bank­ruptcy in US his­tory, in­ten­si­fied fears the world’s fi­nan­cial sys­tem was on its deathbed, and share mar­kets sunk by more than half.

Many peo­ple lost their life sav­ings and homes as world sunk into re­ces­sion.

Aus­tralia nar­rowly es­caped a re­ces­sion but fi­nan­cial gloom swept over us, and the scars among in­vestors and su­per fund mem­bers who lost piles of money still run deep.

Mil­lions of words have been writ­ten about the GFC but, a decade later, rel­a­tively few about what to do when it hap­pens again.

Mar­kets crash when we least ex­pect them, and some fore­cast­ers say boom­ing US stocks are due for a tum­ble that would flow through to us.

Les­sons from the GFC can help us pre­pare bet­ter for the next col­lapse. Les­sons like these: 1. NO KNEE-JERK REACTIONS

Many in­vestors sell at the bot­tom and buy at the top, just be­fore as­set prices fall again. It’s the com­mon herd men­tal­ity that’s ex­tremely tough to re­sist.

In­vestors and su­per fund mem­bers who moved ev­ery­thing to cash at the low point of the GFC were pum­melled out by a one-two punch – they lost half of their as­sets in the fall, then com­pletely missed out of the re­bound.

Su­per­an­nu­a­tion in­dus­try group ASFA says some­one who switched to cash back then has only grown their in­vest­ment by 10 per cent since, while bal­anced su­per fund in­vest­ments have grown 85 per cent and growth funds 90 per cent in the past decade. 2. IN­VEST LIKE BUFFETT

Warren Buffett is the world’s rich­est share in­vestor and one of his most pop­u­lar quotes is “be fear­ful when oth­ers are greedy and be greedy when oth­ers are fear­ful”.

If you nail this, you get great prof­its. Once the Aussie share­mar­ket bot­tomed out in March 2008, it surged more than 55 per cent over the next nine months.

Tim­ing it right re­quires ex­treme luck or a crys­tal ball, so make small reg­u­lar in­vest­ments in strong com­pa­nies that are un­der­val­ued. 3. DON’T TRY TO CATCH FALL­ING KNIVES

I failed dis­mally at knife catch­ing dur­ing the GFC. Af­ter Aussie shares had tum­bled 25 per cent by mid-2008 I bought up big – us­ing bor­rowed money – while think­ing “surely it can’t go any lower”. Err, try an­other 30 per cent lower.

This is why mak­ing small reg­u­lar in­vest­ments – known as dol­lar cost av­er­ag­ing – is a suc­cess­ful strat­egy. 4. DIVERSIFY

Hold­ing a di­verse range of as­sets is one of the best ways to pro­tect wealth. On the share­mar­ket to­day you can in­vest in govern­ment bonds, lo­cal and global shares, cor­po­rate debt, all types of real es­tate ev­ery­where and com­modi­ties such as gold.

You’ll have to do re­search, seek ad­vice if un­sure, and don’t put too many eggs in one bas­ket.

Im­por­tantly, have a plan about how you will re­act to a fresh fi­nan­cial cri­sis.

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