It's now been one year since the COVID-19 outbreak sent global markets into freefall. How have investors fared since the 2020 crash and what are the lessons learned?
Hungarian-born illusionist Harry Houdini was famous for his great escapes. So was American actor Steve McQueen, at least in his onscreen role in the 1963 film classic The Great Escape.
And it's somewhat fitting that both men were born on March 24, because that's also the date in 2020 when global share markets began what could arguably be described as one of the greatest escapes in history.
The scene had been set over the previous few weeks as the rapid spread of COVID-19 fuelled panic on international share markets. Like they usually do, markets moved very quickly.
In the space of just a few weeks, after having hit an all-time record high in late February 2020, markets went into freefall.
The Australian share market, caught up in the maelstrom, dropped more than 35 per cent over about 20 trading sessions to reach its lowest level in more than a decade on March 23.
But, almost as quickly as it all started, markets suddenly began to rebound.
The turning point was March 24 last year with the endorsement of a US$2.2 trillion coronavirus economic rescue package announced by the former Trump government – the largest in U.S. history.
Share markets have been steadily moving higher ever since and, one year later, the Australian share market is more than 50 per cent above its 2020 low point. The U.S. market is also trading at new record highs.
The accelerating rollout of COVID-19 vaccines, the huge monetary stimulus programs launched by many countries to offset the economic impacts of the virus, and record low interest rates, have acted as a safety net for financial markets.
Markets remain unpredictable
If there's one key investment lesson to be learned from the events of the last year, it's that financial markets are unpredictable.
Few would have seen last year's sudden share market downturn coming, let alone the start of the market's rebound just a few weeks later.
Picking the 4,359.60 S&P/ASX 300 Index low point of the Australian market on March 23 last year would have been pure luck.
Even more unpredictable has been the market's growth trajectory, to a level where the Australian market is now very close to having recovered all of its losses from early last year. The U.S. market has already achieved that.
Record capital inflows into exchange traded funds (ETFs) and unlisted managed equity funds are a strong indicator that investor confidence in the prospects for equity markets is very strong.
In reality, trying to time markets is virtually impossible.
For long-term investors, the events of the last year have only reinforced the fact that market downturns, no matter how long they last, are invariably followed by market upturns.
Just being invested in the market, and making ongoing contributions, will ensure you never miss a beat.
Time in the markets is what counts
If we look back on investment returns over the past 30 years going back to 1990, what emerges is a very clear picture of growth across all major asset classes.
The volatility in markets over time is also clearly evident, with the period including major downturns such as the sharp market correction that led to the prolonged Global Financial Crisis between 2007 and 2009.
The chart above clearly illustrates the sharp downturn in global financial markets last year, but also the strong rebound from early 2020 through to the end of December.
Looking back over the past 30 years, it also shows that all asset classes have provided consistent growth over time, and some much more than others.
Taking the Australian share market, for example, up until the end of December it had delivered an average return of 8.9 per cent per annum over three decades, assuming all distributions had been fully reinvested.
Using a base amount of $10,000 invested back in 1990, a person holding Australian shares through an ETF or managed fund tracking the whole Australian market would have turned their initial holding into more than $141,000. That's a total return of well over 1,000 per cent, excluding any fees, expenses and taxes.
A $10,000 investment into U.S. shares over the same time frame would have returned 10.3 per cent per annum and be worth more than $200,000 using the same assumptions as above.
Even cash, the lowest-returning asset, would have delivered a total return of 5.2 per cent per annum and turned $10,000 into almost $50,000 with the benefit of compounding returns.
That's the ultimate power of being focused on time in the markets, instead of trying to time markets.
Having exposure to a range of asset classes to achieve broad diversification also reduces concentration risk and helps smooth out returns.
That's because the returns performances of different asset classes are constantly changing in line with market movements.
Markets will rise and fall, but it's all about staying the course, leveraging the combination of compounding returns and low investment costs, which together really add up over the long term.
After such a volatile investment year, it's abundantly clear that time in markets will always win out over trying to time markets.
By Tony Kaye Senior Personal Finance Writer, Vanguard Australia 23 Mar, 2021 vanguard.com.au
General Advice Warning: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
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Please enjoy the links to these free tools supplied by MoneySmart – a great resource for general financial information. Please get in touch if you would like to discuss any questions that you may have as a result of using these calculators.
Tess has over 22-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.
Over the last seven-years, Tess has turned her attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.
Tess’s mission is to bring the ethics and integrity of her Chartered Accounting background to the area of wealth management.
As a woman in a male dominated field, Tess is active in promoting gender equality in the industry through various programs and mentoring opportunities.
Using her depth of knowledge and experience in tax and accounting Tess is able to demonstrate a level of competence that is unique in the Financial Planning sector.
2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
2004 – Graduated Masters of Commerce from the University of New South Wales
2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2007 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2015 – Awarded a Diploma of Financial Planning
2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial
B.Bus, B.Sc, CA, DipFP
Adam has over 18-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.
Over the last seven-years, Adam has turned his attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.
Adam’s mission is to bring the ethics and integrity of his Chartered Accounting background to the area of wealth management.
Combining traditional accounting and financial services has been a welcome move for Adam, allowing him to operate and advise in the financial sector that has been a long time personal passion.
Using his depth of knowledge and experience in tax and accounting Adam is able to demonstrate a level of competence that is unique in the Financial Planning sector.
2005 – Graduated Bachelor of Science from the University of Western Sydney
2005 – Commenced employment with Wybenga & Partners and part-time accountancy studies
2007 – Graduated Bachelor of Business from the University of Western Sydney
2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2010 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2015 – Awarded a Diploma of Financial Planning
2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial
What is an Advisory Cadetship? An Advisory Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.
How does it work? Generally, our cadets complete a relevant business or accounting degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.
The Firm provides 3-hours paid study leave per week to attend university. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.
We take the work life balance very seriously at Wybenga Financial and our cadets are encouraged to have a fulfilling life outside the office. A typical day will have you arriving at the office at around 8.30am with most days concluding at 5.30pm.
What are the benefits of an Advisory Cadetship with Wybenga Financial? Our cadets benefit from the following:
Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers
Work helps your studies – by working full-time our cadets are able to apply their practical knowledge in the university subjects
Camaraderie with other cadets – the Firm has a number of cadets at various stages of their career
Mentoring – cadets are paired with a senior staff member who oversees their progress and training both at work and with their studies
Communication and feedback – the Firm has an open door policy which enables all cadets to interact with all members of staff including Directors
Culture – the Firm promotes a friendly social culture with a number of functions throughout the year
Modern environment – including ‘socialising’ areas such as pool table and break out area
Training – ongoing support and technical training. We also provide internal and external training on a monthly basis
Remuneration – working full-time provides a market salary and independence with salaries being reviewed every 6-months
What happens when I complete my degree? The completion of your degree is the first step of what we hope to be a long and successful career with us. The next step is the commencement of a Diploma of Financial Planning followed by completing the requirements to become a Certified Financial Planner (CFP).
There are always progression opportunities for the right cadets and we are dedicated to the long term development of our staff.
Who should apply? Current Year 12 students or first/second year University Students who:
want to commence their career in financial advisory;
are due to commence or are currently completing a part-time business or commerce degree at university with an advisory major;
want to gain valuable hands-on experience while completing their qualifications;
are looking for a friendly working environment;
are team players who display initiative;
have a commitment to self-development;
possess excellent personal presentation and communication skills; and
are motivated and mature minded.
How do I apply for an Advisory Cadetship? To apply for a Cadetship position at Wybenga Financial send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.
Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).
What if I have more questions? For further information about our Cadetship program, please send your enquiry to .