Panic could destroy nest eggs, not protect them
SUMMERLAND Credit Union chief executive officer Margo Sweeny says she feels a bit like the ABC financial reporter who said on television this week he had no idea what to say about the market because of its constant volatility.
Over the past week, further confusion and worry has been created in the minds of the public with major mortgage funds Perpetual and AXA Asia Pacific freezing $5.5 billion of investors' savings.
This follows the exclusion of these funds from the Federal Government's deposit guarantee scheme.
Ms Sweeny has just returned from Darwin from the annual general meeting of ABACUS - the peak body representing mutual building societies and credit unions in Australia.
She said talks there touched on the further turmoil created in people's minds with this new aspect to the global downturn and its local effects.
“But the main thing is for people not to panic,” she said.
“If people start worrying about their nest eggs and withdraw their funds from otherwise stable financial institutions, it will just weaken those organisations.
“They might think they're buying themselves some time, but investment in the share market is a long-term strategy and with eight years of market growth, this market downturn could well be viewed as a correction.”
Ms Sweeny advised people who were concerned about their funds to make sure they did their homework before taking any action, just as they did when they looked at investment possibilities.
“I would hate people to sell at a loss in the current market, when leaving their funds where they are might be the best strategy for the future,” she said.
“People should take heart from the Government's deposit guarantee scheme, which reflects the fact our financial system is the best regulated in the world.
“That is why the Government has stood behind the banks.”