How will shares meltdown hit you?
WITH the Australian stock market taking a pounding before rebounding yesterday, an Ipswich stockbroker has warned people to be concerned but not to panic.
The share market started shakily yesterday after hefty falls in America following the weekend's cut in the US credit rating by Standard & Poor's.
Wall Street took a pummelling, leading to shares in Australia plunging by up to 5% yesterday, with shares losing more than $40 billion in morning trade.
But Australian shares made a remarkable turnaround from about noon, where shares continued to rise for the remainder of the session and closed with gains of 1.2%.
While headlines screamed plenty of bad news yesterday, stockbroker Tony Russell, manager of RBS Morgans Ipswich, said it was a time for cool heads to prevail when it comes to making decisions on shares.
Watching the stock market fluctuations on computer screens around his business's CBD offices Mr Russell said it was always good policy to review portfolios at least once a year, but now was not the time to make hasty decisions.
"I think it's very important that people not panic," he said.
"What's happening in the market is caused by macro expectations, or a lack of confidence in policy makers, it's not affecting the actual structure of those investments they have got their money involved in."
He said it was normal for people to be upset at stock crashes but the market usually levelled out.
"Particularly retired people, it's very important because that's about the last of the money they have," he said.
"They're not working any more, there's not future income coming in, except the ability for those assets to produce what they need in their retirement.
"It's very natural that you see them become very concerned about the value of those. But they've got to understand that as long as they're in good quality, this will return and will grow.
"Share markets have, over time, outperformed just about every other asset class."
He said Australia had the benefit of being in a stronger position than other nations, with the Federal Government having the ability to reduce interest rates as a way to simulate the economy.
Mr Russell also said that thanks to the Global Financial Crisis, many companies had reduced their debt, putting them in good stead for the current crisis.
He said the time was right for people with money to snap up some bargain shares.
Interest rates cut
- The Commonwealth Bank of Australia yesterday cut interest rates on its fixed rate home loans by up to 60 basis points from August 12.
- Westpac also announced it had reduced the rate on its three-year fixed rate Premier Advantage home loan by 20 basis points.
- St George cut its two- and three-year fixed home loan rates, by 0.1 and 0.3% respectively, late last month.