Don’t panic in times of market volatility!

Don’t you love that little computer you carry around in your pocket? That fabulous smartphone that lets you connect with friends, book movie tickets, pay your bills, and check your bank balance? The one that allows you to scroll social media and check on the latest news at any time of the day?

Market volatility

It’s AWESOME, isn’t it? About 17 million of us have one.

But, yes, there is a downside. And it’s not just screen addiction.

When you’re lying in bed at 9pm you can be alerted to the worst … impending economic recession, market downturns, the dropping exchange rate … Right now, the impact of Coronavirus is everywhere. All the time.

And at these times, a sense of panic can set in, particularly for investors, and particularly when the news seems, on the face of it, pretty foreboding.

Ponder the pros and cons

Don’t panic, ponder the pros and cons


But the number one enemy of wise investing is knee-jerk reactionary action.

After the US stock market volatility in February 2018, a US-investing app called Stash, conducted research on how investors behaved over that period, by monitoring what decisions they made.

When the major stock indexes suffered big losses, male investors were, on average, 87% more likely than the female investors to sell.

They continued this pattern over the following week showing to be 76% more likely than women to sell their stocks and shares. Women, on the other hand, had a tendency to wait until the dust had settled, and then locked in their losses.

The study was focused on the different ways men and women approach investing, but it also illustrates that large numbers of investors were making decisions when the market was still moving. This kind of rash decision-making, so tempting under fraught conditions, is not necessarily the best strategy.

A word of caution

A word of caution


Remember: It’s not prudent to make decisions when:

  1. The market is still shifting
  2. Your emotions are running high.

If you’re concerned about your portfolio, don’t make decisions alone. Discussing your investments with your fund manager or financial planner will help you find clarity in the midst of uncertainty. These professionals have access to reliable and sophisticated data and can, after years of experience, generally sense how investments will react in certain circumstances. They can be a valuable sounding board to help you make decisions. Especially now.

Consider your financial goals

Consider your financial goals


All investments come with a degree of risk, and they’re cyclical. What goes up, will come down … and eventually, vice versa. Of course, it’s not that simplistic and there are many factors at play. But this is exactly why you need diversification in your portfolio. Diversification across a number of different investment classes, for example, property, cash, and local and overseas shares will help minimise risk because in any given investment period when performance is averaged out, some investment classes will perform better than others.

During the GFC of 2007-2008, those investors with diversified portfolios fared better overall because some investments weathered the storm better than others.

Take the long-term view

Take the long-term view


Right now, markets are unsettled. But that doesn’t mean you need to immediately take a negative view. What it does mean, is that you need to take a broader view, and a futuristic view, with your personal financial goals in mind.

Investing is a medium-to-long term game … and any hasty decisions can be seriously counterproductive to what you’re trying to achieve over the long term. It’s important to realise that any setbacks now will have minimal impact if you stay the course for the long haul.

Above all, don’t panic. The current situation is still unclear, and many of the media headlines and the associated hype isn’t necessarily presenting all the facts and information, so don’t buy into everything you read.

Right now, as always, a dose of caution, reliable information, logic and careful thinking will hold you in good stead.

If we can help, contact us.

 

This is general advice and should not be treated as personal advice. Julie Nipperess is an authorised representative of Step Up Financial Group Pty Ltd ASFL No: 512509.

Need more information? Get in touch with Step Up Financial