Keep calm and carry on
May 2025
The daily swings in markets following the announcement of U.S. tariffs – from a 5% slump to a 9.5% gain in U.S. shares – are sufficient to make anyone uneasy. But the best course of action in such situations is to remain true to a long-term investment strategy and resist the temptation to switch to cash.
History shows that periods of high volatility in financial markets tend to be short-lived and reverse relatively quickly.
Over the past 45 years, a typical balanced portfolio (or one with 60% of its assets in shares and the remainder in fixed income) has suffered losses in only seven of those years.
Investors sometimes think it’s wise to sell when a market is down and wait until it has recovered to re-enter it.
But, trying to avoid being invested on the bad days and catching only the good days requires making two decisions correctly: 1) knowing when to get out of the market, and 2) knowing when to get back into the market. They’re both difficult calls to make.
Market reversals are often quick and unpredictable. The market can pick up steam again by the time nervous investors feel confident that everything has settled and it’s an appropriate time to re-enter.1 If they miss out on even a handful of the market’s best days, it can have a real impact on the amount of capital they may accumulate over the long term.
For example, investors who remained invested in Australian shares2 throughout the 10 years to June 2024 built significantly more capital than those who missed just its 10 best days in that period.3
And those who missed the best 20 days wound up more than 50% worse off than if they had remained invested for the full decade.4
That’s why financial advisers often say that “it’s time in the market, not timing the market” that delivers the best results for investors.
If you have questions about your portfolio in the current environment, please speak to your Invest Blue adviser.
1 Russell Investments – Market timing amid volatility
2 As measured by the S&P/ASX300 Total Return Index
3 Russell Investments – Value of an Adviser Report, 2024
4 ibid
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