Would Investors Have Benefitted from Staying with the Australian Share Market Through 2008 Instead of Being in the Dip #2 Fund
The Global Financial Crisis (GFC) caused a worldwide drop in stock markets and Australia was no exception. Although not as badly affected as some other developed economies (Brown & Davis 2009, p. 1 of 7), the effect of the GFC was clearly felt in the Australian share market. The following graph of the Australian stock market (S&P/ASX 200) for 2008 illustrates the extent to which the market was affected by the GFC.
The stock index, which was at 6353.20 points at the beginning of the year, fell dramatically throughout most of the year, dropping as low as 3352.9 points on November before reaching …show more content…
On a similar note, the GFC has left a large number of repossessed properties in its wake in many parts of the world and the banks are eager to sell those properties quickly which presents a good opportunity for savvy investors to invest in such properties while the prices are down and there is prospect for high rental yield (Luhmann, B 2011). Since the DIP #2 fund consists of investment in properties around the world, it can take advantage of this situation as well.
Finally, the DIP #2 fund already includes investment in various bonds. In a fund such as this, the percentage of investment in bonds, stocks and property is carefully balanced so as to obtain an optimal risk and reward ratio. The fact that the DIP #2 fund only went down by 25% during the GFC when the world economy was in shambles is a testament to the fact that the DIP #2 fund is a well planned investment fund with impeccable asset allocation. By intelligently distributing its investment among bonds, stocks and property, the DIP #2 fund seems to have found a combination that provides good