The share market is quite volatile these days compared to 2017 and 2018, but I’m not worried by that.
Volatility Is Nothing To Worry About?
Share markets are meant to be volatile. The share price on any given day is decided by what the lowest seller is willing to sell at and what the highest buyer is willing to buy at. Every day there will be different buyers and sellers, so of course share prices will change each day.
People are very emotional, and we have a tendency to be far too ecstatic or despairing about positive or negative events in our personal lives or in the news. That’s one of the things I enjoy about writing about ASX news pieces – I relay the facts first and foremost.
The last year of share market movements have shown how rapid people’s moods can change. At the end of August 2018 the ASX 200 (XJO) was at 6,300, four months later it had dropped to 5,470 and now it’s back to 6,250. Meanwhile underlying economic conditions haven’t changed that much at all.
It’s the volatile market conditions that allow us to temporarily buy shares of quality businesses like Altium Limited (ASX: ALU) or Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) at much cheaper prices than they were just weeks prior to the volatility.
Nearly everyone reading this still has many more years of owning (and hopefully buying) shares, so I view temporary market setbacks as times to get excited and be greedy to buy shares at beaten-down prices.
A trade war between the US and China can definitely affect things, perhaps quite badly if it went on a long time. But, the share market has recovered from much worse over the decades including the GFC, two world wars, the cold war, the tech crash in 1999 and so on. The share market has returned an average of 10% per annum including the bad times.
Australia and the whole world has changed enormously over the past few years, the past two decades, over the past century and so on. Businesses will keep trying to grow profits and I think owning shares for the long term/forever is the best place for most people’s (investable) money.
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Disclosure: Jaz owns shares of Altium and Washington H. Soul Pattinson and Co. at the time of writing, but this could change at any time.