Amid whispers of a crisis in the financial markets, Lonsec has suggested that while a crisis can have a severe impact on the markets, investors who avoid herd-like selling can often protect themselves.
Positively, the research house also said that for active and contrarian fund managers, the disruption surrounding crises could present opportunities. It warned, however, against trying to time the market.
Looking at the impact on financial markets of eight major political and market crises over the last 20 years, as shown in the chart below, the Dow Jones had rebounded by the 150-day mark of each of the events bar the Global Financial Crisis.
In many instances, it had even produced gains that exceeded the initial loss.