Market wrap: another week of panic trading as volatility continues


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There has been a debate about the lack of financial literacy in Australia for quite some time and how more should be done in schools to educate the next generation.

Sadly, financial literacy continues to be a big issue in this country that impacts everyone. Currently, there is a lot of volatility in the stock market that is causing many investors to panic and make emotional rather than logical decisions about their investments.

It is all too easy to default to investing your money in a managed fund, hoping you get a good return, although that doesn't stop the average Australian from being worried, stressed or making poor decisions during volatile times like we are experiencing now.

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When speaking to individuals about their investments, it becomes apparent that most do not fully understand what they have invested in and it is this lack of understanding why so many struggle to retire with sufficient funds in retirement.

Knowledge overcomes fear, which is why I believe investors need to change their attitude from being ignorant to one of being informed and educated. The earlier you start to accumulate knowledge and understand your investments, the better off you will be.

While the Government encourages investors to be informed, particularly with the MoneySmart website, more needs to be done. It is for this reason why we need to ensure the younger generation is informed and educated, as it is this generation who are under more financial pressure than past generations, as they struggle to buy their first home.

As globalisation grows and the world gets smaller, it will pay for us, as a nation, to have this younger generation more money smart, so that they will have the skills to not only protect our wealth but grow it in an increasingly competitive environment.

Best and worst performing sectors

Once again, the market has been down this week with all of the sectors falling. Utilities is the best-performing sector down just under 1%, while Communication Services is down around 2% so far followed by Healthcare, down just more than 3%. Hardest hit this week so far has been Financials, which is down more than 10% followed by Information Technology down just under 10% and Energy down just more than 8% so far.

Looking at the top 100 stocks, the best performers include A2 Milk, which is up almost 10% for the week with TPG up more than 6% followed by IAG up more than 3%. The worst performers include Link Administration, which was again hit hard and is down around 24%, while Flight Centre is down more than 21% and Pendal Group is down more than 18% so far this week.

What's next for the Australian share market

As I mentioned last week, it is normal for the market to fall 8-12% when moving into a low and since the close on the All Ordinaries Index on February 21 to the low this week, the market has fallen just under 13%. Given this we are in the target zone and the timeframe for the low to occur.

While this is good, we need to be prepared in case the market falls further.

If it does occur, then my bottom target for the fall is around 6200 points. The good news is that we may have already seen the low and the market will rise from here, however, it is still too early to tell.  Once again, now is not the time to panic but rather sit on your hands and wait for the dust to settle.

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Dale Gillham is chief analyst for Wealth Within (AFSL 226347). He has an Advanced Diploma and Diploma of Share Trading and Investment and more than 25 years' experience in the financial services industry.

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