How volatility to get you out of the mines sooner?

In financial markets, the term "volatility" often carries a negative connotation, invoking images of uncertainty and risk. However, upon closer examination, volatility emerges as an asset for long-term wealth building. Furthermore, when used correctly is can accelerate your wealth and help you build enough assets to eventually replace your mining income.

In times of heightened market volatility, such as during the Covid-19 pandemic and the Global Financial Crisis, headlines often proclaim the substantial losses incurred by the economy. While this may be accurate, what it doesn't immediately convey to many investors is that the share price of their assets may have simply fallen, yet they still retain ownership of those assets. The example that we have been using recently is the share prices during the Covid-19 pandemic. For example if a share dropped from $90 to $50, many would be panicking, however if this was any other commonly consumed commodity, experiencing an almost 2 for one sale, they would be a line up out the door.

This same concept can be used in relation to your personal wealth creation. During this time, your superannuation (depending on its asset allocation) would have been purchasing this discounted share, which is why many have experienced such positive returns over the last couple of years. If these investors, has recognised the opportunity during this time and consciously bought more individual units, its likely that they would have seen even further growth from their assets. Using the same example, if you held the share that
you bought for the next 12 months and a dividend of $3 per share was paid, your would have experienced a 6% yield.

As these assets growth they will produce more income and more shares which will only increase your asset base, allowing them to one replace your mining wage, while still ensuring that your portfolio is able to increase in capital growth. Obviously, this only an example of volatility and there are many other factors to consider such as diversification investment time frame and risk profile. Like always it advisable to seek professional advice before making an investment.

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