Even though market volatility is a natural part of the investment cycle, it’s understandable that some people feel nervous during market downturns – particularly the volatility we’ve seen in recent months.
To help you, here are four smart tips to get you through it!
TIP 1: Stay calm
Volatility is expected and downturns do not last forever. Markets do recover and climb up over time.
It’s important to remember that volatility, even extreme volatility, is part of the investment journey. Even so, we get it if it makes you uneasy, but we’re here to tell you we’ve seen this before and this too shall pass. Even though deep market declines, historically sharemarkets and growth assets have come back and delivered higher long term returns than defensive investments.
TIP 2: Be smart
Don’t let the fear of loss in the short term question your long-term investment strategy.
It’s best to keep emotions out of investment decisions, but all too often fear of loss gets the better of people. During market downturns, you only (actually) lose money in super when you switch out of growth assets.
Let’s look at this from another angle to help explain. Consider your house, say the property market is suffering and house values drop 10% to 20% - would you think of selling then? You wouldn’t think so, unless you absolutely need to for a specific reason. If you sell your house when house prices are low you realise the loss, but if you wait for the property market to recover you can sell it later at its fair value, or an even higher price. It’s the same with shares, and your super.
TIP 3: Stay invested
Don’t cash out when prices are dropping and lock in losses.
In times of downturns, the urge to switch from a growth-oriented strategy to cash can be very strong. But the risk of this approach is that you will lock in your losses, particularly if you switch to Cash, and you will likely miss the gains on the way back up.
TIP 4: Stay focused
Super is a long-term investment, know your game plan and hold firm.
With super, it’s so important to keep the end game in mind – for most of us that’s a comfortable, happy retirement with no money worries. To achieve this, your investment strategy needs to be working for you the whole time. Once you’ve chosen an investment strategy to get you there, you should hold firm. It’s generally not a good idea to regularly check your balance and make rash decisions based on market movements.
We’re here to help
It’s natural to be concerned when markets are volatile, but you can talk to us about it.
If you’re unsure about your investment strategy or are worried about market volatility, we’re here to help. Simply call 1800 757 607 during business hours to speak with a financial planner.
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.