Why Woolies’ share price plunge is good news for everyday investors

Instead of lowering a few percent each week for two months, the market reappears immediately. The movement looks bigger, but faster. Think of it as a band help. Fast and painful, but immediately.

The edge of slow drift is gone. Less retail investors trade the market and more money flowing more money is priced immediately. If Woolworths misses, that day fell 15 percent. If Coles beats, it increased by 9 percent. No delay. No free lunch for professionals.

Without ETFs and index funds, you will still have a market where slow retail money is easy to hunt for professionals.

. S&P Spiva Australia Scorecard It supports it. Ten years later, the less active Australian stock manager is eaten. Not because they suddenly lose their touches. But because the game changes.

Alpha dries when drifting after earnings disappears and only talented players remain. Active Fund A to the active Fund B against A, and when everyone is equally good, it decides the winner. So Aussie investors select low -cost index funds and ETFs, where the main driving force of chance is not.

‘No buyer’ wrong story

Sometimes you will hear that the ETFs are not there to “capture the falling knife”. They continue to take the index slowly, but do not go in when a CSL or WOOLies rolled.

This is not the real problem. The reason why it is less recipient after bad news is that all professionals already know the story. If they think the stock is still very expensive, they won’t buy it. The price decreases until a new balance is found.

This may feel brutal. However, retail investors who do not read the results by the end of the week are more fair than allowing milk to leave milk. Volatility is a sign markets broken. A sign of what they work better. The news of earnings is instantly pricing instead of dripping for months.

Of course, this is moving more frightening graphics. But it also means that prices reflect the reality faster. And for long -term investors, that’s exactly what you want.

Next time, when you see headlines about “wild swings” and “earning volatility”, do not point to passive investment. Thanks. Because without ETFs and index funds, you will still have a market where slow retail money is an easy hunting for professionals.

This game is over. And this is a gain for everyone.

Chris Bryckki is the founder and general manager of online investment consultant Stockspot.

• The recommendations given in this article are general in nature and do not aim to influence readers’ decisions on investment or financial products. They should always seek their own professional advice, taking into account their personal conditions before making financial decisions.

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