High Volatility/Anxiety

Yves SchoofInvestments

 Share markets across the globe have exhibited high volatility over the last couple of weeks, leading to negative returns for some indices.

Inflation is rearing its head in the US and also Australia (pointing to the prospect of higher interest rates), oil prices are escalating and there is the threat of war in Ukraine  – these have all weighed on investors’ minds.

Retail investors (particularly novice investors, which now make up a big proportion of the investor landscape) typically get scared by wild market fluctuations and tend to sell when the market retreats.

This leads to the common scenario where many investors buy high and sell low.

So, rather than getting scared by market volatility, and acting on emotions, investors should follow some strategies to get through these volatile times.

 

Diversification

Diversification is a proven way to beat market volatility as different types of investments and assets typically behave differently under different market conditions (to a degree at least). For example, if you only invest in Australian shares and ignore international shares and bonds, you are only exposed to a single market and thus a higher degree of risk.

 

Focus on the long-term

Share markets are volatile by nature and any type of share investment should always be made with a long-term view of 7-10 years. During that time there might be wild fluctuations, but in the long-term shares should outperform cash and other conservative assets classes. So, any paper losses during a market correction may get reversed once markets recover.

 

Rebalance your portfolio

Make sure you are not overexposed to one particular area or stock, and check that your risk profile is still consistent with your portfolio. When markets go up, you typically become over-exposed to shares, which means you will get hit harder when markets drop.

 

Quality is important

Quality or blue chip assets should recover, whereas more speculative shares or assets may become worthless. Make sure that you understand what you are invested in and that you are still comfortable it will be a good long-term investment.

 

Don’t make emotional decisions

Sometimes not doing anything at all might be the best thing for you. I have seen people sell investments based on fear at the lowest point, only for the market to recover the very next day, leaving them paralysed, being too scared to buy back in.

If you are a long-term investor, and your risk exposure and investments are still appropriate, you should not have to worry.

 

Conclusion

During times of volatility, it is easy to get carried away by your emotions and market sentiment. But rather than making emotional decisions that may prove to be costly, take a step back, seek professional advice where you can and make a fully informed, rational decision.

Please contact us if you need any help.

Yves Schoof
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Yves Schoof

Author | Specialist Adviser for Medical Specialists and Surgeons at Affluence Private Wealth
I specialise in managing and coordinating the financial affairs of medical professionals and have been recognised as one of the best financial planners in Australia. I am a Certified Financial Planner and member of the Financial Planning Association of Australia.

As I understand your time is extremely valuable and scarce, I am able to offer flexible meetings times, including outside business hours and during the weekend. I can even come and meet you somewhere convenient, or talk via videoconference on Skype.

My first consultation is free. I allocate up to 90 minutes to discuss your personal circumstances and to establish how I may best assist you. Where you already have an existing adviser, I would be happy to offer a second opinion. I always quote a fixed dollar fee before we start working together.

Please contact me on yves@affluenceprivate.com.au or call me direct on 0432 885 295. You can follow me on Twitter @YvesSchoof or connect with me on LinkedIn to receive new articles.

DISCLAIMER
Yves Schoof and Affluence Private Wealth are Authorised Representatives of Synchron, AFS Licence No. 243313. 

The information posted is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs.
Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making a decision.
Yves Schoof
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