Australian shares plunged to their worst performance in eight months last week, wiping $50 billion from the ASX as markets sold off worldwide.
While periods of volatility are understandably unsettling for investors (no one likes to lose money), at times like these it’s worth remembering that periods of volatility are a normal part of the investment cycle.
It’s important to try and resist the urge to react or let emotions influence your decision making. Otherwise you risk crystallising losses which at this stage are only on paper.
Try not to over-react
Over time, the value of your investments will go up and down, depending on market conditions. Reacting to short term adverse market conditions may mean you miss out on subsequent market improvements.
It’s important to have a diversified investment portfolio. Different asset classes perform differently over time which helps to offset market volatility in a particular asset class.
Long term investing
Investing is a long term strategy. It is expected that there will be periods of volatility but over the longer term markets typically recover from short term movements.
Stick to your plan
It makes sense to understand your investment risk profile and build this into your financial plan. You should regularly review your investment profile and financial plan to make sure it still reflects your current position. Like most plans, it makes sense to stick with the long term objectives.
Periods of market volatility serve as a reminder to review your investments regularly. If you are in any way concerned about the performance of your investments, please feel welcome to contact me on (03) 8393 1000.
Paris Financial Services Pty Ltd is a Corporate Authorised Representative (No. 357928) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969 AFSL No: 223135. Information contained in this document is of a general nature only. It does not constitute financial or taxation advice. The information does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Capstone Financial Planning nor their directors, employees or authorised representatives gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document.