The Stock Market is volatile! What should we do?

The ASX 200 has recently fallen as much as 11.5% from the high at the beginning of the year, to the low in late January.   With rising inflation, the likelihood of interest rates increasing, and a property boom, this decline has caused concern for many.

But is it time to panic? Should you be re-assessing your exposure?

The short answer is No, you don’t need to do anything.

Provided you have been through an asset allocation process and considered your timeframes, your objectives and your personal risk tolerance, the current situation is a normal part of the market cycles and no action is required.

We all hate to see investments go down and the pain is very real, to be concerned is a normal reaction and it happens to everyone.  We are living through some turbulent times, with Omicron spreading across the globe, supply chain issues in pretty much every industry for markets to not react would be unusual.

When we have periods of volatility it is important to put it in perspective and to revert to investment fundamentals.  The fundamentals are:

  • your investment time horizon
  • your asset allocation, and
  • your personal tolerance for ups and downs

No-one can predict whether markets will go lower, or higher tomorrow, the only thing we can guarantee is that they will move.  It is notoriously difficult to pick the top or the bottom of markets until after the event, and on that basis trying to time the market is a game we shouldn’t play.  This chart below from Morningstar, highlights the danger of incorrect timing, versus holding the course.  Click here for the full article.

Where possible I try to find the silver lining, just think about all those cheap shares your regular contributions are currently buying, ready for the next upswing.

If you are concerned, please reach out to me on liz@hailefinancial.com.au to confirm whether you need to take any action.  Otherwise, happy investing!

Liz