We all know the S&P/ASX 200 Index (ASX: XJO) market crash that we saw in March was both brutal and filled with extreme volatility. After all, the ASX 200 went from over 7,100 points to under 4,500 points in just over 1 month – a ~40% turnaround which quickly wiped out years' worth of gains.
But research from ASX fundie Allan Gray actually proves what we were all thinking – the March market crash was the most brutal the ASX has seen since Black Monday in 1987. Not in terms of sheer losses – the GFC still comes out on top there, but in terms of market volatility.
According to Allan Gray, March 2020's intraday stock market volatility was:
"Greater than at any other time [since 2000] and significantly exceeded the peaks during the Global Financial Crisis (GFC) between 2007 and 2009. In March this year there were nine trading days with volatility above 10%, seven of them consecutive. During the GFC there were only four days in total with greater than 10% intraday volatility and no consecutive trading days."
Despite these extraordinary statistics, Allan Gray's Chief Investment Officer, Simon Mawhinney, stated it wasn't all bad news during March and investors should take advantage of volatility when it does happen:
"Volatility is your friend when investing for the long term, with the at times extreme fluctuations in price presenting excellent long-term buying opportunities. The causes of the current bout of volatility are certainly different . . . but in each of the previous bouts of market volatility, significant opportunities were presented to long-term, patient investors. It is hard to believe that this will be any different today."
How do we invest if the ASX crashes again?
I think Allan Gray makes some great points. Yes, volatility can be extremely scary when it does occur, but it also gives us a chance to invest in ASX shares at great prices. Volatility often indicates emotion and irrationality in the markets, which is usually when shares become detached from their intrinsic value. Warren Buffett wouldn't be nearly as rich as he is today if it weren't for these kinds of periods.
Just think, anyone who took advantage of the volatility in the Afterpay Ltd (ASX: APT) share price over March would be sitting on gains close to 400% today.
Volatility never lasts, but the decisions you make during those times of high volatility do. Make them count!
