 Is it the line of cars snaked around your local servo, the 8-bit prices slowly ticking up? Is it the threat to Australian meat exports, fuelled by uncertainty in the Strait of Hormuz? Have you doom-scrolled through videos of politicians discussing war, investment bankers pointing at red bars, articles telling you to sell, sell, sell? The age of the internet has changed investing in many ways, but perhaps its largest consequence is our real-time exposure to market movements. It’s easier than ever to get lost in the noise. We’ve put together some simple steps to overcome the urge to bolt when markets get shaky. Step One: Take a minute. Despite what much of the internet says, you have a minute to breathe. Take it. Step Two: Put down the news. There is simply too much to think about. If you don’t distance yourself from it, you will fall victim to its incessant begging. Turn off the push notifications. Close those tabs. Set your phone aside. Don’t check your super balance for the fourth time today. Get back to normal. Step 3: Understand what this means. Market dips will happen. Volatility will happen. It’s a risk that comes with investments, and it’s something that you were okay with, once, when the world did not feel like it was collapsing around you. Ask yourself, “why am I worried right now?” If the answer is: I’m scared I’m going to lose money We would say: High growth investments are built for the long-term. They will fall, and they will also rise, but history tells us that they never stay down for long. And if they do, money likely won’t be our biggest problem! Also remember that as long as your investments are active, you have not realised any losses. If you decide to sell now, those lows will become actualised and will not have the opportunity to bounce back. If the answer is: I’m about to retire and I’m worried I will have to delay my retirement We would say: A good financial plan accounts for these situations by including more resilient allocations the closer you get to retirement age. It’s also good to remember that market volatility is almost always temporary and self-correcting. Your balance will continue to grow (and align itself) as markets bounce back. Patience is key. If the answer is: I’m retired. How will this impact my super-based pension payments? We would say: If you are receiving income payments from your superannuation account, you may consider using your cash “buffer” to weather market shifts and dips. This ensures you do not have to sell units during a dip but can instead take them from the cash portion until the market rises again. If the answer is: I should sell, right? That’s the only way to fix this! We would say: Selling at a market low may be the worst thing to do. You will be selling your units for less, and then likely buying them for more once the market bounces back. Selling is one of the quickest ways to cement a loss! If the answer is: I’m thinking of changing my allocations. We would say: Did you know that changing your investment allocation is essentially like selling down your units? When you lodge an investment switch request with your super or managed fund, they will sell down your current units and re-purchase your requested allocations. This means you are still selling at a market low. We would recommend waiting until after the market has stabilised (and consulting with your financial adviser) prior to making any decisions to change your allocation. Step Four: Wait it out. There is nothing to do but wait. Selling now means selling when the unit price is at its lowest. In most cases, the best thing to do for your future is to wait. Step Five: Celebrate. You’ve just made it through a market fluctuation! Once the graphs are back in the green, you’ll realise that there wasn’t much to worry about. Which brings me to my next point: Step Six: Reflect Was this dip just too much to bear? Did it keep you up at night? Were you drawn back to the news no matter how much you tried to avoid it; a bug to the incandescent glow of the Yahoo! Finance app? It might be time to re-evaluate your tolerance for risk. You should reach out to your adviser and arrange a review of your profile to find an allocation that best suits your individual needs. If you’re a client of ours, you can use this link to book a review. Step Seven: Remember these lessons. Keep this feeling in mind the next time the market falls (and there will be a next time). Did panic-scrolling make your feel better, or worse? Did it change the outcome, or leave you exhausted and stressed? Every market fluctuation in recent history has been followed by an onslaught of articles and think pieces, preaching the end of times atop an overturned crate in the internet’s town square. We should take this for what it is: noise. Noise that does not help us achieve our goals. If you are still concerned by these market variations, feel free to contact our office on 07 4766 9688 or [email protected]. Helpful resources:
Any advice provided in this article is general advice only and has been prepared without taking account of your personal objectives, financial situation or needs. Before acting on any such advice, you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. You may wish to consult a financial adviser before making any decisions that will impact your current or future financial situation.
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