Yahoo Finance The share market is at a 9-month high: Here's what that means for you
Firstly, let’s take a trip down memory lane. It’s February 2020. Tiger King is becoming the talk of the town and share markets around the world are booming. In Australia, the All Ords, which is basically a snapshot of how the overall Australian share market is performing, was at its highest level in history.
But all of sudden, at the end of February, the share market fell faster than Pete Evans’ credibility – caused by a lil something we call “the-most-deadly-pandemic-in-100-years”.
Some numbers: In an instant, the All Ords dropped 37 per cent from an all time high of 7,255 points.
But thankfully, much like Woody in Toy Story 1, 2, and 3, the share market has made a hero-like return. Not only are we booming in Australia, but the US share market (S&P 500 and NASDAQ 500) is now at its highest points ever. Let that sink in. In the midst of a GLOBAL PANDEMIC, the share market has never been better.
So we’re going to give you a quick overview of what the hell this all means, including how the share market impacts you (hint: it impacts you even if you haven’t invested) and whether you should start investing today… when the market is on🔥.
Um, quickly. What is this “All Ords” you speak of?
It essentially captures the share prices of the top 500 public companies in Australia and then boils that down into a single number. It makes it easy for you to understand how the Australian share market is doing today. It includes all the big names: Think Commonwealth Bank, Telstra and even Afterpay and Zip.
I haven’t invested in the share market. Why should I care?
Because you actually HAVE invested. Wait… what? You heard us. If you have money with a superannuation fund then it’s likely that you are currently invested in the share market. That’s because super funds invest a portion of your savings into the share market on your behalf. That’s right – your superannuation balance changes depending on the performance of the share market.
Okay so no, you can’t withdraw the money from your super account until you’re in your 60’s, but it’s still important to keep track, because it may impact your investing decisions today. How so? Well, if your super fund invests heavily in mining shares, you may wish to personally invest in socially responsible companies (or just move super funds?)
I hear ya.. so should I invest?
It depends what type of investor you are and your financial goals right now.
Some people invest in shares with a short-term view – in other words, their aim is to take advantage of small movements in share prices and sell the shares quickly for a mini-win. But clearly, the risks of short-term investing are high.
Other people prefer the long-term game. Aka ‘buy and hold’. But of course, for this strategy to work, you need to be able to ride out ups and downs in the market - which ain’t always easy.
But the long-term strategy has been proven to work. In fact, from 1900 to 2019, the Australian share market returned an average of 6.7%. That means if your great great grandmother sold a few sheep and put $100 into an Australian share market index way back in 1900, it would be worth just over $224,000 now. Not bad.
Investing in shares can certainly help you grow your wealth. But like any investment, there is risk involved - so you need to be clear about your financial goals. You also need to make sure that your emergency savings fund is looking healthy before considering investing in the share market.
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Justin Joffe and Brett Joffe are co-founders at Flux. A tech-company making the topic of money fun and exciting for young Aussies.
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