Market volatility is a natural and expected part of investing. At various points in time, investors will see their portfolios and superannuation balances rise and fall—sometimes sharply. While these movements can feel unsettling, particularly during periods of economic uncertainty, it’s important to remember that volatility is not the same as loss. In fact, it is often a necessary part of long-term wealth creation.
Most experienced investors will have heard this before in annual reviews with their Financial Adviser: past performance is no guarantee of future performance. While this statement is often repeated, its importance becomes most evident during times of market decline. It serves as a reminder that markets move in cycles—periods of growth are often followed by periods of contraction, and vice versa.
When markets fall, the instinct for many is to act—to sell, to move to cash, or to “wait until things settle.” However, this is where long-term investment discipline is most critical. Staying the course during volatility has historically been one of the most effective strategies for building and preserving wealth.
One of the key risks investors face is attempting to time the market. This involves trying to predict when to exit before a downturn and re-enter before a recovery. While it may sound logical, in practice it is extremely difficult to execute consistently. Markets can turn quickly, and often the strongest gains occur in short bursts—sometimes just a handful of days.
Missing these “upticks” can have a significant impact on long-term returns. For example, if an investor exits the market during a downturn and waits for confidence to return, they may miss the early stages of a rebound. These early gains are often some of the most powerful contributors to long-term performance. Over time, missing even a small number of the best-performing days can materially reduce overall portfolio growth.
This is particularly relevant for superannuation, where investments are typically structured with a long-term horizon. Super is designed to grow over decades, not days or months. Short-term market fluctuations, while uncomfortable, are generally less significant when viewed over a 10, 20, or 30-year timeframe.
Another important consideration is that volatility can create opportunity. During market downturns, asset prices may fall below their intrinsic value. For investors who continue to contribute—such as regular super contributions or disciplined investment plans—this can mean buying assets at lower prices, which may enhance long-term returns when markets recover.
This is often referred to as “dollar-cost averaging,” and it is a powerful strategy that removes the need to try and time the market. By investing consistently, regardless of market conditions, investors can smooth out the effects of volatility and benefit from both market lows and highs over time.
Of course, none of this is to suggest that investors should ignore risk altogether. Portfolio construction, diversification, and alignment with personal goals are all essential components of a sound investment strategy. This is where professional advice becomes invaluable.
A qualified Financial Adviser can help ensure that your investment strategy is appropriate for your risk tolerance, time horizon, and financial objectives. They can also provide reassurance and perspective during periods of volatility—helping you stay focused on the bigger picture rather than reacting to short-term market movements.
Importantly, advice is not just about selecting investments—it’s about behaviour. One of the greatest determinants of investment success is the ability to remain disciplined during uncertain times. Having a trusted adviser in your corner can make a meaningful difference in maintaining that discipline.
In times when markets are falling and super balances are declining, it is natural to feel concerned. However, history has shown that markets are resilient. They have weathered wars, financial crises, and global pandemics—and have continued to grow over the long term.
Staying the course may not always feel comfortable, but it is often the most effective path forward.
General Advice Warning:
This information is of a general nature only and does not take into account your personal objectives, financial situation or needs. Before making any financial decisions, you should consider whether the information is appropriate for you and seek advice from a licensed Financial Adviser.
If this article has inspired you to think about your unique situation and, more importantly, what you and your family are going through right now, please get in touch with your advice professional.
This information does not consider any person’s objectives, financial situation, or needs. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation, or needs.
(Feedsy Exclusive)