Big swings in playgrounds can be scary for the kids who ride them.
As we get older and start investing in different playgrounds, it’s the big swings in markets that can cause similar emotions.
Recently ‘fear’ gripped markets and we saw a big swing downwards with the ASX 200 trading from 4354 on the 1st of September to 3840 on the 4th of October.
A steep drop of around 11.8% in a little over a month.
Many investors wanted to get off and stand on solid ground.
More recently, ‘relief’ has gripped markets and we’ve seen a big swing upwards in the ASX 200 from 3840 on the 4th of October to 4265 on the 24th of October.
A steep rise of around 11.1% in less than a month.
These days smart phones and modern media can spread ‘noise’ quicker than ever before, and around 60% of market trades are driven by automated (emotionless) computer trading.
Therefore big swings in the market are more likely than ever.
As a long term investor you should expect these swings, understand that no-one can accurately predict when they will occur or in what direction, and hang on tight whilst you focus on the longer term.