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The volatility and instability in the markets has been remarkable to say the least, but stability will return.
Investors just need to wait and be patient. There is no quick fix. The intervention of banking institutions across the globe will take time to work through, but work it eventually will.
We are all feeling the pinch and the effects of living in trying economic times. Interest rates have increased, fuel prices are extremely volatile and the money that paid for a trolley full of groceries a year ago barely fills a basket or two today.
Over the past 52 years, markets have been materially down on 10 different occasions. The duration over which these markets have dropped has varied from as long as 19 months to as little as seven months. Losses during this period have ranged from 20,7percent to 58,3percent.
It is worth noting that in the year the markets recovered, the increases ranged from a low of 20,9percent to a high of 50,9percent. The average increase was 34,1percent - over three years of market recovery, 49,7percent, and five years, 75,5percent. Although over a five-year period on a few occasions, recovery was in excess of 150percent.
In light of this, it doesn't surprise me how much interest is being taken with one's finances. One only hopes that in spite of all the doom and gloom, the festive decorations will blaze and people will begin putting together their gift lists. We all need some cheer in our lives at the moment.
It is interesting to note that the Bible has more than 2200 verses that speak about money and our finances. This shows that even way back then, finances were on people's minds, and nowadays more than ever, especially with increasing longevity, it is vital that our financial fitness is in top form and peak condition.
Though we don't have any control over interest rates or the cost of living, if we strive for and achieve financial fitness, it allows us greater control over our lives and allows for stress-free living. The difference between achieving financial fitness and failure to do so is not how the stock market behaves, but how you yourself behave.
I deal with many radio callers and many people e-mail me or contact me for advice and I am privy to many stories that sadden me, mostly so when I speak to investors who have capitulated, made huge losses and then simply re-invested into much lower risk assets classes. Bear in mind the lower the risk that the asset class carries, the lower the future expected returns are. Sad to say that so many have put their funds into cash. In these cases, the growth of these investors is likely to lag heavily behind inflation.
The gifts for this season will most likely be more frugal than the last few, but there is one gift that tops all gifts - financial fitness and financial health. Make this your resolution now and continue it into the New Year.
l The writer is a director of Pioneer Financial Planning. Visit www.pioneer.co.za or e-mail email@example.com