A decade after the Global Financial Crisis – 10 lessons to learn

Last September marked the 10th anniversary of the collapse of Lehman Brothers, the fourth largest investment bank in the US, and its impact on the world’s investment markets. Ten years on, now is a good opportunity to look back and ask ourselves what, if anything, we have learned from living through those exceptional times. While new lessons may be few, there are some valuable older lessons to be reinforced.

The crisis
Lesson 1: Market cycles are inevitable
Lesson 2: The financial system is based on confidence, not numbers
Lesson 3: Managing and controlling risk is nearly impossible

The reaction   
Lesson 4: Don't panic!
Lesson 5: Some banks are too big to be allowed to fail

The aftermath      
Lesson 6: Emergency and extraordinary policies work!
Lesson 7: If massive amounts of money are being pumped into the financial system, asset prices will surely rise
Lesson 8: If short-term rates are kept at extraordinarily low levels for a long period, returns on other assets will eventually fail/fall in sympathy
Lesson 9: Extraordinary and untried policies have unexpected outcomes
Lesson 10: Markets don’t always conform to expectations

Thoughts from a peek into the future  
Thought 1: The next crisis will be different from the last – they always are
Thought 2: Don't depend on regulators preventing future crises
Thought 3: The outlook for monetary policy is unknown

So what now?  
Action 1: Don't abandon diversification. The Scheme’s funds are diversified across multiple assets.
Action 2: Be dynamic! This simply means being ready for change, but unless your circumstances alter, sometimes doing nothing is the best option.
Action 3: Don’t discard active management. Active managers, like the ones employed by the Scheme, can take advantage of market opportunities in both good and bad times.