Holding Tight During Market Volatility
We know that market volatility can be off-putting to investors who might be considering equity markets as an investment option. But depending on your financial goals and time frame, market volatility doesn’t need to be a precluding factor when making decisions about your investments.
By mitigating the risks that market volatility brings and knowing how to stay calm when the market is in turmoil, equity investments could be the answer to reaching your lifestyle potential.
Stick to the Plan During Market Volatility
Attempting to guess when gains and losses are going to happen will only hurt your investment in the long run because market performance is almost impossible to predict. By adjusting your investments this way, you could miss out on the best performing days for your portfolio which are critical for your overall returns. The share market has a historical long term trend upwards, and by stepping in and out of the market you’ll miss out on these benefits.
Volatility is a Normal Part of Long-Term Investing
Levels of volatility can vary so it’s important to understand that volatility is normal and there’s no need to panic. We work with you to figure out your risk profile to ensure you can cope with the levels of volatility that might occur with your chosen investment.
Understanding that volatility is a normal part of long-term investing in particular options can help to reduce your concern and worry.
The Benefits of Regular Investing
Regular investing can help you reap the benefits of ‘dollar cost averaging’. It means you’re spreading your purchases over a period of time and not locking your investment in at a single day’s rate. By investing this way, you will have opportunities to invest in a falling market which is when good deals can be found.
Diversification is Key
A diversified portfolio may be the key to managing market volatility. If you’re exposed to a particular industry that may not be performing, it’s likely you’ll also have investments in an industry that is doing well. The differences in asset performances may help to smooth out your return and also minimise risk.
Look for Opportunities to Grow
Corrections are a normal part of market cycles and can create opportunities for growth. A correction can make some prices more attractive which gives you the potential for higher than normal returns when the market bounces back.
Understand your Investment Strategy
Don’t underestimate the power of knowing the ‘nuts and bolts’ behind your investment strategy. This includes knowing why and how it has been developed. By understanding your investment strategy, it helps you to be comfortable with the level of volatility expected and you won’t be surprised by short-term market actions or outcomes.
Don’t Let Emotions Lead you Astray
Stay true to your investment strategy and don’t allow the sentiment of the market dictate your actions. If you find you’re getting the confidence wobbles about your investment, speak to an experienced financial planner before making any changes.
Take a look at our fact sheet on market volatility which goes into greater detail on why staying calm during unsettling performance periods could benefit you in the long run.
The right investment strategy is one that moves you toward your lifestyle potential without losing sleep at night. Let a Modoras Financial Planner guide you to a strategy that will meet your goals. Call us on 1300 888 803 for a complimentary consultation.
IMPORTANT INFORMATION: This blog has been prepared by Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licences (Number 233209). The information and opinions contained in this presentation is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. Any individual making any investment or borrowing decisions should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to borrow funds or purchase, sell or hold any particular investment. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of, credit contract entered into or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog may change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.