Staying the Course

Heightened global markets volatility can easily trigger kneejerk reactions by panicked investors.

Widespread selling, triggered by the Russia-Ukraine crisis, has been behind recent big swings on global financial markets.  This includes stock markets, commodities and currency markets.

As serious as the current events are, heightened market volatility is nothing new. The onset of the COVID-19 pandemic also triggered major falls on global markets two years ago.

In March 2020, the Australian share market dropped 35%+ over 20 trading sessions.  It reached its lowest level in over a decade.  Very soon after, it and other global financial markets staged a quick and very strong rebound.

By the end of 2020, share markets were back near record levels, and last year they continued to build momentum.

Investors who didn’t panic, chose to ride through all that early 2020 markets volatility.  Those who have remained invested ever since, have been well rewarded with both capital and income growth over time.

In volatile market conditions, staying the course is generally the best investment strategy.

Three mistakes to avoid during a downturn

1. Failing to have a plan

Investing without a plan is an error that invites other errors.  Chasing performance, market-timing, or reacting to market “noise” driven by headlines included. Temptations multiply during downturns, as investors looking to protect their portfolios seek quick fixes.

2. Fixating on losses

Market downturns are normal, and most investors will endure many of them. The number of shares you own won’t fall during a downturn unless you sell. In fact, the number will grow if you reinvest your funds’ income and capital gains distributions. And any market recovery should revive your portfolio too.

3. Overreacting or missing an opportunity

In times of falling asset prices, some investors overreact by selling riskier assets. And, then moving to government securities or cash equivalents. It’s a mistake to sell risky assets amid market volatility in the belief that you’ll know when to move your money back to those assets.

Time in the markets is what counts

Trying to time markets is virtually impossible. Just being invested in the market, and making ongoing contributions, will ensure you never miss out on long-term growth.

If you’re unsure about your current investment portfolio, call the Wealth Planning Partners Team today to discuss a strategy for you.

Source: Vanguard March 2022

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

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