Why volatile markets separate true investors from the rest

Male looking stressed out in front of his laptop computer

There’s a saying among seasoned pilots that flying can best be described as long stretches of boredom punctuated by moments of sheer terror.

Many investors, reeling from the recent pullback in the US sharemarket that commenced on 5 February after the stellar returns of 2017,  would no doubt share these sentiments.

For newer investors who’ve never experienced a share market pullback of this size and speed, the recent movements must have been nerve-wrecking. Media headlines screaming “market rout”, “bloodbath” and “worst point decline in history” certainly didn’t help matters either, stoking fear in the investing public for the sake of clicks, views and readership.   

If you’ve just had your first experience of a sharemarket dip, welcome to the club. Grab a seat and catch your breath. It may be your first market correction but it will almost certainly not to be your last. All-time sharemarket highs followed by the occasional reversal are a feature, not a bug, of long-term investing.

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Ask Harry: What’s the difference between a dividend and a distribution?

dividend distribution

People often tell me that they find investing intimidating because of all the technical language involved in becoming a competent investor.

Thankfully, for the most part you can be blissfully ignorant of 99% of the technical terms in finance and still beat the majority of professional investors out there.

I’d go so far as to say that keeping things uncomplicated is the key skill you need to develop if you’re going to get ahead financially.

That said, there are a few terms you really do need to familiarise yourself with on your journey to financial security.  Two of the more confusing are dividends and distributions.  Often these terms are used interchangeably, even though they have very different meanings.

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