Market volatility and your portfolio

Take a long-term view Investment results tend to vary more widely when you just consider the returns over a period of one year. Ten-year returns are generally much more stable and a lot more predictable as can be seen in the chart below.

Impact of reacting to short-term noise
Volatility is part of investing, and whilst we can avoid it, there’s typically a price to pay for doing so in the form of lower expected returns over the long term.

The chart below shows the impact different strategies have had on an investment portfolio over the previous 15 years.

As you can see, this example shows the volatility (Dark Green line) – larger moves both up and down – but highlights that by remaining ‘invested’ over the long term has resulted in a significantly higher portfolio balance at the end of the period.

The GFC was an uncomfortable investing experience, much like today’s environment. However, a well-diversified portfolio protected investors during the drawdown (this example portfolio fell by ~26% at its lowest, whilst Australian shares fell as much as 47%) and remaining in the market helped investors enjoy significant gains over the past decade.

Please note: Past performance is not necessarily indicative of future returns.

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Disclaimer: The information contained in this document is based on information believed to be accurate and reliable at the time of publication. Any illustrations of past performance do not imply similar performance in the future. To the extent permissible by law, neither we nor any of our related entities, employees, or directors gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of information contained in this newsletter. This information is of a general nature only. It is not intended as personal advice or as an investment recommendation, and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should read the product disclosure statement of any financial product referred to in this newsletter and speak with your financial planner to assess whether the advice is appropriate to your particular investment objectives, financial situation and needs.