Riding out the ups and downs
We know market volatility can make some people feel uneasy, and that’s ok. While there may be cause for some concern, more often than not there’s a lot of media hype around it. Short-term market volatility is a normal part of investing and occurs from time to time.
Here’s some tips to help you cope with volatility.
1. Resist the urge to switch to low risk/low return investment options
Basically, when you switch to a low-risk investment option during periods of volatility, you’re likely to lock in the losses and may miss the gains on the way back up.
While market volatility may lead to a short-term drop in your super balance, history shows that you are likely to recover short-term losses if you stay on course with your long-term investment strategy.
Remember if you’re invested in a growth-style investment option, it’s probably because you are aiming for higher long-term investment growth so it’s best you stick to your strategy. Low-risk investment options will not deliver significant growth in returns over time.
2. Know your risk tolerance
The relationship between risk and return is pretty straightforward – the greater the potential return, the higher the risk of variable returns.
When you choose an investment strategy, aim to stick with it and target a certain level of returns over the long term. To do so, you need to be comfortable with the level of risk associated with your investment strategy.
Generally the best course of action during periods of market volatility is to stay on course with your investment strategy, unless your personal circumstances or financial goals have changed. If you’re unsure about your investment strategy, our financial planners can help you.