Invest
‘Volatility not the same as risk,’ investors told
Following the spike in volatility over the past year, investors have been reminded by AMP Capital that risk relates to factors beyond just volatility and that it can even signal opportunity in some cases.
‘Volatility not the same as risk,’ investors told
Following the spike in volatility over the past year, investors have been reminded by AMP Capital that risk relates to factors beyond just volatility and that it can even signal opportunity in some cases.
AMP Capital chief executive Shane Oliver said volatility is expected to remain higher for a while compared with the calmer 2012-14 period; however, volatility is different to the risk of investors not meeting their investment goals.
Mr Oliver said volatility is an “unexpected deviation in the path to an investor’s destination [or their] investment goal”, while risk is the probability of not reaching that destination.
“In other words, there is much more to risk for investors than volatility,” he said.
It is also important to note that Mr Oliver said volatility often indicates opportunities for investors as it “invariably surges during share market slumps like those seen into 2003 and 2009, as this is when shares are selling cheap”.
“In fact, periods of low volatility when markets are smooth and investors relaxed can be periods of maximum risk.”
Time can also smooth out short-term volatility, said Mr Oliver.
“For example, while share market returns can be highly volatile over short-term periods, they tend to be quite smooth over long periods,” he said.
“Since 1900 for shares roughly two years out of 10 have had negative returns but there are no negative returns over rolling 20-year periods.”
He said investors, however, should be careful that any leveraged strategies that involve the risk of being forced to close positions after falls.
“[These strategies] are particularly risky during periods of volatility because you can be left without the ability to participate in the subsequent recovery in markets. So manage leveraged strategies carefully,” he warned.
Mr Oliver said investors will need to consider what is more important: “Complete avoidance of any fall in the value of your investment or achieving a decent and stable income flow?”
He said: “If it’s the former then bank deposits are the way to go. If it’s the latter then there are a number of alternatives to consider including corporate debt, commercial property, infrastructure and shares offering decent, sustainable dividends.”
RELATED ARTICLES
Property
North platform adds household reporting feature to boost adviser efficiency
AMP's North platform has launched consolidated household reporting across multiple client accounts, helping financial advisers streamline their client review processes. Read more
Property
What Adds The Most Value To Properties?
Wondering how to up the value of your property? Properties are worth a lot of money in general, but there’s always a way to maximise value. The good news is that most of the things you can do to ...Read more
Property
Centuria reports strong growth in alternative real estate sectors for FY24
Centuria Capital Group has reported significant growth in alternative real estate sectors for the 2024 financial year, driving stable performance and increased guidance for FY25. Read more
Property
How to leverage equity in your home for investment or renovation
Home equity, the value of your property minus any debts owed, is a powerful financial resource many homeowners in Australia can utilize to further their financial goals. Whether you're looking to ...Read more
Property
Exploring REITs: Real estate investment without buying property
Real Estate Investment Trusts (REITs) offer a compelling investment alternative for those interested in the real estate market but may not want to endure the complexities and capital requirements of ...Read more
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
Property
North platform adds household reporting feature to boost adviser efficiency
AMP's North platform has launched consolidated household reporting across multiple client accounts, helping financial advisers streamline their client review processes. Read more
Property
What Adds The Most Value To Properties?
Wondering how to up the value of your property? Properties are worth a lot of money in general, but there’s always a way to maximise value. The good news is that most of the things you can do to ...Read more
Property
Centuria reports strong growth in alternative real estate sectors for FY24
Centuria Capital Group has reported significant growth in alternative real estate sectors for the 2024 financial year, driving stable performance and increased guidance for FY25. Read more
Property
How to leverage equity in your home for investment or renovation
Home equity, the value of your property minus any debts owed, is a powerful financial resource many homeowners in Australia can utilize to further their financial goals. Whether you're looking to ...Read more
Property
Exploring REITs: Real estate investment without buying property
Real Estate Investment Trusts (REITs) offer a compelling investment alternative for those interested in the real estate market but may not want to endure the complexities and capital requirements of ...Read more
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
