Episode 11

Financial crash proof your share investments

Welcome to Finance and Fury!

  1. Financial Crash proof your Share investments
  2. There is no way to control the rise and fall of investments but focusing on what you can control makes all the difference!
    • Behaviours lead to under performing, or outperforming, the ‘market’
  3. Firstly – What you buy and when
  4. Secondly – What you actually do when a “crash” occurs

What is a correction or crash?

  1. Drop on prices – followed by mass hysteria – panic selling – further declines in investment values
  2. Shares can drop quickly – They are liquid
    • Liquidity = How easy is it to sell shares and get your cash back
  3. The share market is a measure of crowd behaviour
    • Positive feedback loops

What triggers a crash?

  1. Prolonged periods of rising markets, excessive in the long term
    • P/E far exceed long term averages
    • Higher buying volumes
    • Year on year large gains
  2. Then something spooks investors to think the good times are over
    • If the markets think good times are done with, they will be
    • Self-fulfilling prophecy – positive feedback loops

What makes people sell shares at a loss?

  1. Myopic Loss Aversion – Fear of further losses – Losses (even on paper) are hard to bear, so people crystallise losses to avoid feeling further potential paper losses
    • Shares are some of the most feared investments out there
      • People feel like they can’t see or touch them, but if you buy some Woolworths – just remember half of you probably visit a store once a week.
      • They are hard to understand – Fear from the unknown
  2. History of share crashes and the drops – 1987, 2008 (worse than US)
    • What happened before this? Markets rose – 2002 to 2007 = 226% rise

What can you do? 

On the buy

  1. Diversification – Have one egg, it breaks, you have no eggs. If you have 1,000 eggs and one breaks, you’re ok!
    • Different segments – Not all banks, but across large, mid, and small cap, as well as different types of companies
    • Different countries/economies – we make up 2% of share market – 98% of companies are off shore
  2. Don’t overpay for investments
    • FOMO – Bubbles in shares are pretty clear
    • Market PE – Shares are valued mostly on expected future earnings (inherent values).
    • Where are we at now?
      1. Gains – 194% cumulative rise in the market since 2012 – but still not above 6,700 in 2007 pre GFC
      2. PE – In line with long term average

  1. Don’t buy rubbish – never invest out of hope into shares that might not be around tomorrow
    • Shares are ownership in a company – Is it a good company? Will it be around in 10 years?
    • Is it a fad, and not earning? They don’t survive crashes as well – avoid speculative shares

When the crash happens

  1. Don’t panic sell!
    • What happened the next year? After a crash there is rebound
      • Why? Demand picks up the following year
    • Buy more! If you are game!
      • Why would you buy something going down? Why is it going down?
      • You can buy investments on special – 2 for 1!

Let me get the crystal ball out…

  1. The next crash – Will come in form of borrowings within debt instruments / levels of government debt especially in the US. The market freaks out because they think the government can’t service their debts and default on their debts.
    • Sad truth – free market gets blamed for government interference
  2. Nobody knows what will happen.
    • Hold for long term

In summary

  1. Markets work in cycles – they go up, they go down
  2. The long game – hold and buy – Next Sunday we talk about FEAR and avoiding emotions

Thanks for listening – we need YOUR feedback! Leave a review, or ask your finance question at financeandfury.com.au/contact

Is it time to buy silver? For those who use the Gold to Silver ratio it seems to be, but what factors affect this?

Welcome to Finance and Fury Today – Talk about a Money Illusion and the GSR  Gold has been on a rally – but silver hasn’t gone up by as much The Gold-to-Silver Ratio: What is It and Why Does It Matter? For experienced investors, the gold-to-silver ratio is one of many...

Eco-warriors are protesting for exactly what mining companies, Banks and the IMF want

Welcome to Finance and Fury, the Furious Friday edition Today is a Bonus episode on most recent series – Current events unfolding – Extinction Rebellion – Today focus more on the economy - Talk about How eco-warriors will collapse the economy – a self-fulfilling...

Should I switch my investments from High Growth to Conservative and why store gold personally instead of a vault?

Welcome to Finance and Fury, the Say What Wednesday Edition Back to answering individual questions - Two questions this week – follow up to recent episodes on gold and economy First from Mario – just a quick one - I listened to a recent podcast you made about gold and...

At their current prices, are Bank Shares a good income investment?

Welcome to Finance and Fury, The Say What Wednesday edition This week the question from Jayden – Are CBA and other bank shares a good investment for dividends at the moment? Based around current price and un-updated yields – Based around prices and assuming dividends...

Is water investment the petroleum of the 21st century?

Welcome to Finance and Fury, the Furious Friday edition. Episode today about a trend over the past decade and moving forward – is water the new petroleum? A few episodes ago – went through what is more valuable – a TV or water – depends on your perception and what is...

Furious Friday: Is cheaper better, or do you get what you pay for?

Furious Friday Is cheaper better, or do you get what you pay for? Welcome to Finance & Fury’s ‘Furious Friday’! Today’s misconception – Is cheaper better, or do you get what you pay for? Met with a client this week for an initial appointment – He had been reading...

How does the adaptability of humanity open the door to Global Economic control?

Welcome to Finance and Fury, The Furious Friday edition   Today we start discussing the SDGs in relation to The economy – few SDGs this relates to Go through each in detail in separate episodes – but this ep is an overview into how deep this goes. UN goals as...

Furious Fridays: The dark side of electricity price capping

Furious Fridays The dark side of electricity price capping Welcome to Furious Friday! I recently saw a news article about Australians being “promised new laws to slash up to $832 from their annual electricity bills” This article outlines; This is a “federal government...

With increased government stimulus packages and supply shocks, will we experience inflation in the economy?

Welcome to Finance and Fury. With everything going on in the world, the notion that inflation could return with a vengeance may materialise. This will be a two part episode. Today, we’ll look at the potential paths for inflation and quickly assets to hold and those...

The share market in March! Comparing now to 2008 and 2009 and which one we are closest to?

Welcome to Finance and Fury - Where are we at? Market has been going up - Looking at a chart – March in 3 particular years stand out – 2008, 2009 and 2020 – Why? They are each their own respective bottoms of the market after declines – In this episode - March 2008,...

Pin It on Pinterest

Share This