Lesson in turbulent market: This too shall pass

While we’re in uncharted territory in our financial markets and many investors are confused and concerned, older and more experienced investors have lived through similar times before.

If you look back over the last decade, we’ve had the introduction of CGT, the dot-com stock market crash, September 11th, gone to war overseas, a change of government, periods of high interest rates and low interest rates, the GFC and a myriad other factors out of our control that seemed scary at the time and created uncertainty for our investments.

The big lesson is: “This too shall pass.”

Unfortunately these problems will not go away quickly, and we are entering new era in the financial markets. But this is not a time to panic or make rash emotional decisions. It is a time to learn from history. 

You just have to look back a few years to the correction after the GFC when local share prices plummeted 50%, but the peak-to-trough fall in Australian home values was just 3 to 4%. 

Compared with shares, property performed very well. 

It was much the same in 1987, when the share market crashed and property values languished for a while before property boom that created fortunes. 

This as also true after the dot-com boom collapsed into what became known as the “tech-wreck” in 2001. Many investors will remember the property boom of 2001-03. 

There’s no denying that things are probably going to get worse before they get better. 

However, if history repeats itself, as it surely will, while the majority of Australians will sit on the sidelines feeling sorry for themselves, successful investors are looking for and buying investment opportunities created by the change.

As always, some people will thrive not just survive in these difficult times.

Michael Yardney is the director of Metropole Property Investment Strategists , a best-selling author and one of Australia's leading experts in wealth creation through property. He also writes the Property Investment Update blog.