By Shane Oliver, Head of Investment Strategy & Chief Economist from Oliver’s Insights, AMP Capital, Edition 25 2017
Key points
- The key lessons for investors from the Global Financial Crisis (GFC) are that: high returns come with higher risk; while each boom bust cycle is different, markets are pushed to extremes of valuation and sentiment; be sceptical of financial engineering or hard-to-understand products; avoid too much gearing or gearing of the wrong sort; and monetary and fiscal policy work. The GFC also highlighted the importance of proper diversification and asset allocation.
- Another boom bust cycle is inevitable at some point but it will likely be very different to the GFC.