Today is tipped to be a rocky one for the stock market following the overnight lead from the USA where the Dow dropped in excess of 800 points.
This will have an impact on your investments, superannuation and pension balances.
The important thing is not to panic. Volatility is the cornerstone of the stock market, and isn’t actually something to be afraid of. We have seen many of these falls (and subsequent rises) over the years, in particular the Global Financial Crisis and the reaction to COVID.
The worst way to deal with a stock market decline
One thing you must remember about stock market volatility is that you don’t actually lose money until you react to it. That gasp-worthy loss you might’ve seen on your computer screen when you checked your portfolio balance? Unless you sold anything, it was only hypothetical.
Stock market fluctuations — even sizeable ones — are completely normal. And yesterday’s downturn in the USA followed by today’s drop in the Australian market are by no means catastrophic.
If you let yourself panic every time the market falls by a few percentage points or even undergoes a full-fledged correction (a decline of 10% or more), you’re going to harm your health and possibly your finances if said panic leads you to make rash decisions.
Not only are corrections fairly common — they happen, on average, about once a year — but the market has historically recovered from them and then some. You’re more likely than not to come out ahead, provided you leave your portfolio alone when the market does tumble.
If you have any queries or wish to discuss your portfolio please don’t hesitate to contact us at Vision Financial Strategies on (08) 9474 9777.
The Vision Financial Strategies Team