GFC shock still playing out among risk averse investors
Investors have sustained deep psychological blows as a result of the global financial crisis (GFC), which is why many are easily spooked by recent turbulent investment markets and cannot see them as noise or market corrections, according to head of Australian Unity Investments (AUI).
AUI chief executive, David Bryant, said the impact of the GFC is still being seen with many investors still deeply risk averse and concerned about large scale market events such as those recently afflicting Greece and China.
"Risk aversion helps people sleep, but it does not pay the bills or return people's investments back to pre-GFC levels. Yet the types of corrections we are seeing are normal but investor over-reactions has been too high," Bryant said.
"These concerns are driven by the GFC which was very real and very tangible for many people and cost real jobs and real money for some of them."
Bryant compared the GFC to the Asian currency crisis or tech wreck of the early 2000s stating these were pockets of hyper-valuation and correction while the GFC was the first time many investors saw something so widespread it would take a decade from which to recover.
"So when noise comes up investors are panicking about what might happen because they don't see it as noise or a correction," Bryant said.
"The psychological impact is in line with the Great Depression and investors are relating what is happening now to what happened to markets in the past instead of looking at what is actually happening to markets in the present."
AUTHOR
Jason Spits
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
