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Hewison Insights

Why I’m not losing sleep over current market volatility.

Glenn Fairbairn
Partner & Wealth Adviser
15 May 2022

There is a lot happening in the world of investing right now. Whether it’s the ongoing conflict in Ukraine, rising interest rates, rising inflation, or the Federal election, there seems to be nothing but bad news and uncertainty for share and property investors. We have already seen the ASX 200, and Dow Jones fall around 6% respectively over the past month, and even the local residential property market is seeing a contraction in prices. 

At this stage of the investment roller coaster many investors get nervous and think about sitting on cash or even selling out completely. It’s hard to not have this mindset when financial news reports are filled with RED, the media feed on our fear, always remember bad news sells. 

The funny thing is I can’t remember how many times over the past 20 years I’ve heard “this time is different” or “ get ready for the biggest bear market in history”. It’s also incredible how quickly investors lose their head and forget the reward of staying calm. It was only two years ago, in March 2020, when the ASAX 200 fell around 30% in almost a month, and the “experts” were predicting recession, depression, global economic collapse, etc, etc. I don’t recall anyone predicting the fall in the months leading up to March, and I don’t recall anyone predicting the market would recover by the end of April. 

So, what is the lesson? Ignore the noise, invest in quality, and invest for the long-term. As Warren Buffett says, “if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes”.   

The reality is the odds are stacked heavily in your favour if you invest for the long term. Markets go up, down and sideways in the short term, but in every single 8-year period over more than 140 years, the market has gone up.

In fact, if you took my advice when buying shares, and invested for a minimum of eight years, then on average you would have a 120.4% return. Over the past 140 years there have been NO occasions on record where the dividends and capital growth would have been negative. 

The short-term volatility in the market should only worry you if: 

  • You are more concerned about short term gains than long term wealth accumulation. 
  • You are speculating in high risk rather than high quality investments. 
  • You don’t have adequate diversification across other asset classes to smooth returns. 
  • You don’t have an adequate investment time horizon to overcome a short-term downturn. 

These are all the reasons why I am not losing any sleep. Our clients have clear strategies specifically tailored to meet their needs, in good times and bad, and we are well equipped to take advantage of the downturn, by looking for value, rather than panicking. 

Disclaimer: Any information, financial product or advice provided in this website is general in nature.  It does not take into account your needs, financial situation or objectives.  Past performance is not a reliable indicator of future performance. Before acting on the advice, you should consider whether it is appropriate to you in light of your needs, financial situation and objectives.