The Global Financial Crisis and investors
As 2008 dawned and it became clear that the world faced a genuine financial crisis, many were thrown into panic. Underlying weaknesses in even advanced economies like the USA and the UK were thrown into stark relief. Massive stimulus packages and record low interest rates could not stem the bleeding. Investment banks Bear Sterns and Lehman Brothers collapsed and AIG - once the world's largest insurer - went to the brink.
As the bad news continued, dramatic measures were taken to protect Australia. In February 2009, the Federal Government's AU$42 billion stimulus package was passed in the Senate. Perhaps even more significantly, between August 2008 and February 2009, the Reserve Bank of Australia slashed official cash interest rates by 4%.
This did not stop the announcement in March 2009 that Australia experienced a negative growth of 0.5% in the first quarter - something not seen in Australia in the past 8 years. Furthermore, although growth in the following quarter was slightly positive (thereby avoiding a technical recession), economists were quick to point out that this was largely caused by a decrease in imports and an increasing population, rather than a more productive economy.
As could be expected, investors in more volatile asset classes were hit hard by all of these developments. The S&P/ASX 200 stock market index lost nearly half of its value between late 2007 and early 2009, effectively losing an entire decade's worth of growth. Stories abound of people being forced to abandon retirement plans and of retirees forced to return to work to cover the shortfall in their retirement savings.
Wealth survey reports
All this has caused many Australians to question the adequacy of their retirement plans. In late 2009, Citibank released its 'Australian Wealth Survey'. Among its findings was the worrying fact that around one in two Australians are not confident that their retirement savings will be sufficient to provide for a decent lifestyle post-work. This correlates with the similar findings in the 2009 AMP.NATSEM Income and Wealth Report that many retirement funds will not last for the length of the average retirement.
So where to for investors?
Business collapses have, of course, been occurring since the beginning of time and stock markets will always be subject to dramatic swings. But having an adequate savings and investment strategy is imperative if we are to enjoy a decent lifestyle in retirement.
Investors, particularly those nearing retirement, need to be able to access stable and reliable investment options. In doing so, they should never forget the three immutable rules of investing:
- Rule 1: Never put all your eggs in one basket
- Rule 2: A higher rate of return always equals higher risk
- Rule 3: Getting rich slowly will never go out of fashion.
At Intellichoice, we are committed to helping you increase your wealth in a safe and fairer way. We ensure that there is no conflict of interests and any recommendations we make for growing your wealth is aligned with your goals and gives you peace of mind.
For more information about our services and how we can assist you with retirement planning, speak to our financial planners at 1300 55 10 45 or visit https://www.intellichoice.com.au/.
