Investors – here’s what to do when the turbulence hits.

Checking the Stock Market data

All investments are taking a hit right now, whether they’re shares and bonds, cash, gold, or property …. Across the board markets are volatile in response to the global Covid-19 crisis. There’s not a lot you can do … but stay the course.

So, sit back, keep a cool head, and remember your long term goals.

A lot of people are stressed and some are even panicking, biting their fingernails to the bone, completely unnerved about what’s going on with investments right now, and it’s a totally understandable response. It’s your money at risk, after all. Your savings. Your retirement.

But if you don’t keep your emotions in check, then you could drive yourself crazy with worry. And then you fall into the trap of making emotional decisions that won’t necessarily serve you well in the long term.

Investor behavior has been the focus of a lot of studies and there are many theories that attempt to explain why we get so emotional about investments.

There are some tried and true principles though, that will hold you in good stead in the best of times, and also the worst of times.

Gadgets and Financial chart on the table
  • Risks are inherent in every investment

Investments all go through cycles – there will be ups and downs that are not always easy to predict. This is the risk you take when you decide to invest. And even the most seasoned investors will tell you it is virtually impossible to predict a market’s short-term moves. You need to be aware of how much risk you can tolerate. And secondly, how to minimise the risk in your portfolio.

  • A diversified portfolio minimises risk

Simply put diversification means ‘don’t put ‘all your eggs in one basket.’
By investing across different industries and different types of investments, locally and overseas, you can work to minimise risk, because some asset classes will perform well in a given period of time and others won’t. This helps to balance out the gains as well as the losses. If you have a managed portfolio, then you have diversification built-in. Your superannuation too, is invested the same way,

Researching for a long term investment using financial chart
  • Invest for the medium to long term.

Investing over a period of time – several years – gives your investments a chance to smooth out if there are blips in the market. It’s likely you will face market volatility at times, and this is natural.

  • Do your research

As a general rule, live by the premise that you can’t believe everything you read. Make sure you’re not basing your decisions on the latest headlines. Absorb the information, but also find evidence from alternative sources to back it up.

Calculating savings for retirement plan
  • Don’t make decisions while the market is volatile

One of THE WORST times to make decisions is when the market is still shifting. It is always best to sit, breathe, and assess. Remember, there’s no such thing as the ‘perfect’ moment, or ‘ideal timing’ – there is only wise-decision-making.

  • Nearing retirement?

Of course, people close to retirement age are bound to be feeling a sense of ‘time running out,’ unable to wait for market correction to recoup losses. BUT, there are strategies you can put in place. The best thing to do is get professional advice to assess your portfolio and work out the most appropriate investment plan for you to be able to weather the market storm and keep your retirement plans on track.

Putting coins in a jar with a clock for retirement savings

Investing without emotion is always easier said than done, but it’s important to remember that nothing lasts forever – especially not market volatility.

There have been many times throughout history where markets have suffered significant losses, the Global Financial Crisis, for example, 2007-2008.

Also remember when stock prices fall there are also opportunities to buy inherently well-performing stocks at a lower price, which will provide good returns when the market recovers.

Unfortunately, as is human nature, people tend to talk up the bad times more than they do the good ones. Most experts agree though, that when the turbulence hits, ‘buckling your seatbelt and holding on for the ride’ often results in the best long-term performance results.

If you have questions or concerns, talk to 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