While market swings can be unsettling, wise investors will be well prepared
(This article was first published in The West Australian, YourMoney, on 28 April 2025)
The past month has been a wild ride for investors. With global markets reacting sharply to Donald Trump’s tariff announcements, volatility has surged and many portfolios have taken a hit.
We still don’t know how the financial year will end but there is a strong possibility that when checking the investment statements at June 30, results could be subdued, if not negative, for the first time in a while.
But while market swings can be unsettling, history tells us that staying calm and focusing on the bigger picture is the best approach.
Quality over hype
For the past decade, it felt like everything was going up. Whether it was shares, property or even speculative investments — there were very few places to lose money.
Cheap credit and market confidence drove strong returns, sometimes even for investments with flimsy value.
But now we’re seeing what happens when confidence wobbles. Much like we saw in 2020 when COVID-19 first hit, investors are moving away from hype-driven assets and back towards investments with real, tangible value.
The lesson? Quality always wins in the long run. When times are good, it’s easy to get caught up in speculation.
But in uncertain markets, strong businesses, steady income streams and transparent investments tend to hold up better.
Now’s the time to be selective
For years, investors have been drawn to passive investing, using index funds and exchange-traded funds as a cheap and easy way to gain market exposure.
And while there’s nothing wrong with that approach, in times of high volatility, simply owning everything in an index might not be the best idea.
Now is the time to be more selective. Some companies and industries will weather the storm better than others and an active management approach can help investors position themselves to ride out market uncertainty.
Keeping an eye on which investments are resilient and which are struggling will help protect capital while keeping an eye on future opportunities.
Reassessing your risk comfort zone
Every investor has a risk profile — a balance between how much risk they’re comfortable with and the potential for higher returns.
But here’s the thing: when markets are rising, many people feel more adventurous than they really are.
When things turn choppy, it’s normal to start questioning your choices. If you’re feeling uncertain, now is a great time to sit down with a financial adviser and make sure your investments still match your comfort level.
The goal is to invest in a way that lets you sleep easy at night, even when markets are unpredictable.
Spreading your eggs across more baskets
We all know the saying: don’t put all your eggs in one basket. And yet, many investors unknowingly have concentrated risk, whether it’s too much in one industry, one country, or even one asset class.
Diversification is key. Different types of investments perform differently at different times and having a mix can help smooth out the ups and downs.
This doesn’t mean jumping in and out of investments whenever markets move. It simply means spreading your risk so no single event can hurt you too much.
Cash is your safety net
If you’re drawing income from your investments, having enough cash on hand is crucial. Selling investments at the wrong time — when markets are down — locks in losses and makes it harder to recover.
A good rule of thumb is to have at least a year’s worth of living expenses set aside in cash. This lets you cover your needs without having to sell investments at a bad time, giving your portfolio the breathing room to recover when markets bounce back.
Stay the course
It’s easy to get caught up in the day-to-day headlines, but investing is a long-term game. Market ups and downs are part of the journey and history has shown that staying patient and focusing on fundamentals leads to better outcomes than reacting emotionally.
This is a time to focus on quality investments, take a measured and thoughtful approach and most importantly, stay calm. The best investors don’t panic. They prepare.
