In the latest Oliver’s Insights, Dr. Shane Oliver takes a look at the main lessons for investors from the Global Financial Crisis (GFC), that got underway 10 years ago and whether it can happen again.
The key points are as follows:
- The key lessons for investors from the Global Financial Crisis 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 skeptical 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.