For long-term investors, however, the most useful question is often not “What will the market do next?” but rather, “Does my investment strategy still support what I’m trying to achieve?”

Volatility is part of investing

Volatility simply describes how investment prices or returns fluctuate over time. It includes periods when markets rise as well as periods when they fall.

A change in the value of your portfolio is worth understanding, but it does not automatically mean your strategy needs to change.

Money invested for a goal 10 or 15 years away has a very different purpose from money you expect to need within the next year or two. That is why an appropriate investment strategy should consider your goals, timeframe, need for access to funds and the level of investment risk you are comfortable taking.

Be careful about reacting to headlines

When markets fall sharply, moving investments to cash or more defensive assets can feel like a way to regain some certainty.

The challenge is that selling and planning to reinvest later requires two successful decisions: when to get out and when to get back in.

Investment markets can also begin recovering before the economic news becomes more positive. Vanguard Australia highlights the difficulty of consistently timing these decisions and the importance of maintaining a long-term perspective during periods of volatility.

That does not mean you should never change your investments. There can be very good reasons to do so. Your circumstances may have changed, retirement may be getting closer, your income needs may have increased, or the level of risk in your portfolio may no longer be appropriate.

The key is making changes for the right reasons rather than simply responding to the latest headline.

Keep your goals at the centre

You do not need to predict what markets will do next to make informed investment decisions.

Understanding why you hold your investments, when you expect to need the money and how your portfolio fits into your broader financial plan provides a more useful basis for decision-making.

If recent market movements have raised questions about your investments, the Count Gold Coast Wealth Management team can review how your portfolio aligns with your goals and whether any changes are appropriate for your circumstances.

Sources

ASIC Moneysmart: What is share market volatility?

ASIC Moneysmart: Questions to ask before you invest

Vanguard Australia: Explaining market volatility and how best to handle it

Vanguard Australia: A long-term approach to market volatility

General information disclosure

This article provides general information only and does not constitute personal financial advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate to your circumstances and seek advice from a licensed financial adviser. All investments carry risk. Diversification does not guarantee a profit or prevent losses, and past performance is not a reliable indicator of future performance. Where relevant, read the applicable Product Disclosure Statement and Target Market Determination before making a financial product decision.

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