Blog Layout

How not to panic when the stock market crashes

Editorial Team • Jul 26, 2018
Image depicting person when stock market crashes

Stock market crashes are a regular occurrence

A stock market crash is when a stock index (the ASX, S&P 500, the NASDAQ or the Dow Jones) drops severely in a short space of time. A correction is more gradual and occurs when the market drops 10 percent from its 52-week high.

Since 1900 there have been at least 29 stock market crashes around the world and on 5 February 2018 the Dow Jones plummeted by almost 1,600 points. Some economists and commentators are presently bearish regarding the global economy and, given this possibility, it is important to have a plan in the event of your investment portfolio declining.

Firstly, don’t panic. If you have built a diversified portfolio, designed for long-term growth, resist the urge to sell, be patient and understand that there is likely to be a rebound in time. Warren Buffett, arguably one of the world’s most successful investors, states “The stock market is a device for transferring money from the impatient to the patient”. When prices drop significantly many investors join the herd and sell, which feeds the cycle.

Secondly, consider buying if you can. A crash, or correction, has historically allowed investors the opportunity to find good quality businesses selling at a large discount to their intrinsic value. Research is a key component to building a strong and diversified portfolio that will weather the storm of a crash more successfully. Ensure that you understand the business, its debt levels and potential future growth and buy it while it’s on sale. Chances are you won’t see that price again.

In the meantime:

  • Consider reducing any leveraged positions. Psychologically debt during a downturn is more likely to cause, or force, an investor to panic sell. Furthermore, a highly leveraged portfolio can be value-destructive, especially if you are forced into margin sales
  • develop a strategy around your investments so that it aligns with your goals
  • endeavour to create a portfolio that can be left untouched for an extended period of time should a crash occur, and
  • rebalance your portfolio as market conditions, and your requirements and appetite for risk, change.

Your objective should be to create a portfolio that you can hold on to during any downturn, as you are confident in its long-term recovery.

BDH Leaders provides a full range of wealth management services aimed at assisting you to achieve your financial goals. Contact us f or further information.

ATO take “Gloves off” on overseas income

By Editorial Team • 06 Sep, 2019
How you are taxed and what you are taxed on depends on your residency status for tax purposes. As tax residency can be different to your general residency status it’s important to seek clarification. The residency tests don’t necessarily work on ‘common sense.’ For tax purposes: Australian resident – taxed on worldwide income including money earned overseas (such as employment […] The post ATO take “Gloves off” on overseas income appeared first on BDH Leaders.

Tax Time: Are you in the ATO’s sights?

By Editorial Team • 16 Jun, 2019
What’s new Live reporting through Single touch payroll Single touch payroll (STP) reporting has changed the way businesses report salary and wages, PAYG withholding and superannuation contribution information to the ATO. For the 2018-19 financial year, only businesses with 20 or more employees were required to use STP. From 1 July 2019, all businesses will need to use STP although […] The post Tax Time: Are you in the ATO’s sights? appeared first on BDH Leaders.

What you can expect after the Election

By Editorial Team • 03 May, 2019
Budget 2019-20: The pre-election announcements that are now law The Federal Budget announced a series of measures, some of which were legislated before the election was called. Extension and increase to the instant asset write-off The popular instant asset write-off for small business has been extended and increased. The new laws: increase the threshold below which small business entities can […] The post What you can expect after the Election appeared first on BDH Leaders.

Borrowing in the post Banking Royal Commission era

By Editorial Team • 17 Dec, 2018
The fallout from the Banking Royal Commission is reverberating across the economy. Banks are simplifying their business models, cutting costs and tightening their lending practices. Boards are streamlining their product offerings in the wake of some pretty astounding findings by the Commission. The impact of the Banking Royal Commission is not only being felt by banks. The property markets continue […] The post Borrowing in the post Banking Royal Commission era appeared first on BDH Leaders.

Is a Limited Recourse Borrowing Arrangement right for my SMSF?

By Editorial Team • 17 Dec, 2018
We borrow all the time to acquire assets; you may borrow to purchase a home or investment property which usually involves a mortgage, you may borrow from a finance company for a car which uses the car as collateral, you may take out a margin loan to purchase equities. These are just some examples but there is another: Limited Recourse […] The post Is a Limited Recourse Borrowing Arrangement right for my SMSF? appeared first on BDH Leaders.

Building wealth with stocks, bonds and funds

By Editorial Team • 21 Aug, 2018
Investing in revenue-producing assets can be confusing. There is a lot of financial jargon to wade through and it’s often not easy to decide which asset best suits your needs and financial goals. In this article we will simplify stocks, bonds and funds. Stocks Stock (equity) is when you purchase shares in a company. The price of a share, purchased […] The post Building wealth with stocks, bonds and funds appeared first on BDH Leaders.

The rise and rise of investing ethically

By Editorial Team • 21 Aug, 2018
Making an investment decision is not always based on the possible return you may receive from that investment. An increasing number of people are basing their choice of fund, or company, on issues around social responsibility, sustainability and corporate governance. In Australia, ethical investing started in earnest in 1986 with the launch of Australian Ethical, followed in 1994 by Hunter […] The post The rise and rise of investing ethically appeared first on BDH Leaders.

Let me be Frank

By Editorial Team • 21 Aug, 2018
What is a Franking Credit? You have probably seen this phrase on tax statements provided to you by a company you invest in but what does it actually mean? Franking Credits are the means whereby Australian companies can give credit for tax paid at the company level to their shareholders, which can then be used by the shareholder to avoid […] The post Let me be Frank appeared first on BDH Leaders.

IPOs vs ICOs – what’s right for you?

By Editorial Team • 21 Aug, 2018
There are significant differences between an initial public offering (IPO) and an initial coin offering (ICO) and before you invest in either option, it is important to understand those differences and the risks associated with each. What is an IPO An IPO is the first sale of a company’s stock issued to the public via a stock exchange, usually to […] The post IPOs vs ICOs – what’s right for you? appeared first on BDH Leaders.

Is your business about to have a growth spurt (and are you ready)?

By Editorial Team • 21 Aug, 2018
Besides the launch phase, growth spurts are the second riskiest time for many businesses. An unexpectedly successful marketing campaign, a sudden change in consumer needs, a ‘hot’ market for a particular type of product or service – any of these things can cause challenges for your business. The question is – will your business cope?   Consider the following points […] The post Is your business about to have a growth spurt (and are you ready)? appeared first on BDH Leaders.
More Posts
Share by: