27/01/2016 by Anthony Keane - Personal finance writer News Corp Australia Network
A FAMILIAR feeling of fear has been haunting investors, super fund members and self-funded retirees.
A shocking start to 2016 for the sharemarket has rekindled memories of the Global Financial Crisis, and worries worsened last week when global bank RBS warned of a "cataclysmic year" and urged investors to "sell everything".
A few finance experts have joined in the gloomy chorus, but many have criticised it, and others have forecast good gains for Aussie shares between now and December.
RBS warned that global sharemarkets might fall by 20 per cent in 2016, which is not that nasty compared with the GFC when Aussie shares tumbled 55 per cent from late-2007 to early-2009.
The All Ordinaries index, which tracks the value of 500 listed companies, has slumped 7 per cent in the first two weeks of January.
It was at a similar level in December and September last year. Wise Owl Financial adviser Allan Ward, who has studied investor psychology, said if the market had simply been flat since September investors would not be fearful.
"People hate losing money more than they like making it - it's the way we are wired," he said.
"The problem with 'sell everything' is when do you buy back in? There will always be volatility and a big variance in opinions - sometimes it's the people at the extreme at either end who get the most airtime."
Most superannuation fund members are exposed to shares - typically about half their retirement savings - but downturns enable their compulsory contributions to buy more fund units for less.
Mr Ward said the sharemarket was simply companies that we use every day, and people should avoid making emotional knee-jerk reactions about long-term investments.
"You are either a short term trader or a long-term investor."
CMC Markets chief market strategist Michael McCarthy said the RBS comments came from an analyst with a reputation for being negative, but the fact it got so much airtime highlighted that investor sentiment was poor.
"This guy's nickname is broken clock. He's been calling the market down since 2010. He's a perma-bear," he said.
Mr McCarthy said the panic might already be over, although the sharemarket was likely to be volatile all year.
"Don't empty out your portfolio at what could be the low point. Ups and downs in markets are natural and normal. The reason why shares over the long term have higher potential rewards is that they also have higher risk," he said.
"Those investors who can show a bit of steel and live with the risk are likely to get the rewards over the longer term."
Angie and Hector Menendez, both 31, said they were comfortable taking calculated investment risks and focused on the long-term growth of companies.
"We typically invest in companies that we would be comfortable keeping even if the stock market was to close for a duration of time," Ms Menendez said.
"Our portfolio is also well diversified across sectors, so our plans are not affected by the recent volatility."
NEW GFC 'UNLIKELY'
AMP Capital head of investment strategy Shane Oliver said there were several reasons why investors should not be too concerned, including low interest rates and the unlikelihood of a global recession.
"The current dynamic is very different to the GFC as lower oil prices and commodity prices are providing a huge boost to consumers and most businesses," he said.
Dr Oliver said recent falls pushed shares back into "very cheap territory", with the gap between dividend yields and term deposit rates back to its highest level since the GFC.
Australian shares must climb 40 per cent just to get back to their record high of 2007. Other markets - such as the US - hit record highs last year.
Mr Ward said it was understandable for mum and dad investors to be annoyed. "I feel for the people who retired in 2006-07 or invested a large lump sum. They may feel 'what's the point of all this' but it comes back to the question of what's your time frame.
"The magnitude of the GFC drop was hopefully once in a lifetime."