Investment
Investor behaviour in a time of financial market crisis
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Investments held within managed accounts can include direct domestic and increasingly international equities, directly held fixed interest securities, listed investment companies (LICs), model port- folios, managed funds including exchange-traded products (ETPs) and exchange traded funds (ETFs) and cash term deposits.

Given that the essence of managed accounts is their ability to assemble direct equities and fixed interest securities into model portfolios, a subtle challenge for retail wealth management groups is demonstrating how they make their investment decisions and administer these model portfolios differently to how they oversee regular managed funds.

This paper looks at investor behaviour in a time of financial markets crisis.

Investor behaviour during March quarter

The extreme market volatility observed in the months of the March 2020 quarter provided observers with a rare opportunity to examine the behaviour of investors in a time of financial markets crisis.

With the spread of COVID-19 across the world in the first quarter, financial markets were sent into a period of extreme volatility, with some of the largest single-day falls and rises in history.

Normally in a bear market a rise in volatility is caused by sharp downwards price movements and sudden price rises rather than a

long, drawn out process where prices fall gradually over time. Price rises in bull markets are normally much slower, with a commensurate reduction in volatility. As the old saying goes, 'Bull markets take the stairs up, bear markets take the elevator down.'

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