There’s a silver lining to market volatility

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For those who are invested at least in part in the Australian share market, the fall that kicked off on the 3rd of September may be cause for some concern.  The ASX200 index fell from 6,351 to a low of 5,837 on the 15th October (a fall of 8.1%) and there are questions being asked about what the future holds.

Whilst no one knows for sure (or if you do please let us know) what will happen to share prices in the future, one thing you should consider if you are a long term wealth creator (which you should be!), is that market volatility is not necessarily the enemy the newspapers would have you believe.

The key, you see, to creating long term wealth is to buy more assets!  So, how do you buy more assets?  Well, you either save some of your hard earned income, or you re-invest some of your investment earnings (or ideally you do both).

Now, what’s the one thing the Australian share market is very, very good at?  It’s paying you amazing dividends!  In fact, among all the recent volatility, you may have lost sight of the fact that the top 20 companies on the Australian share market paid out $993 million dollars in dividends this year, which is 6.4% more than last year (total dividends in September were expected to be 16% higher than last year).  You just received a 6.4% pay rise and you didn’t have to go to work to get it!

Now, if we combine our newly acquired, much higher investment income with lower asset prices, we get to buy more assets.  And what’s the key to long term wealth creation…Buy more assets!

So don’t be too concerned about market volatility, it is in fact a blessing in disguise.