During market volatility, investors often focus on what they could be doing differently. This is simply human nature, as most people are loss-averse to some extent. Doing ‘something’ is sometimes easier than doing nothing when things are not going well. Take advice from the legend that is Jack Bogle, the father of indexing and founder of Vanguard:

Stay The Course

“Just stay the course. Don’t do something, just stand there.”

Bogle believed in strategic asset allocation (buy and hold), and time has corroborated this statement.

It is important to keep a sense of perspective and remember we have seen market volatility before. The tech crash of the early 2000s, the financial crisis of 2008 and beyond, and the recent pandemic have all impacted the markets.

What To Do In Sideways Markets

We have emerged from all these situations, with the market not only recovering but flourishing. The ups and downs create uncertainty, naturally, but this is how the market works. 

Panic selling or buying “the latest” investment products is not the answer. Instead, we must remind ourselves that there is something to be said for conventional wisdom and doing what has always worked. This means owning the whole market, diversifying, and letting the portfolio do its thing.

Focus on Your Goals and Avoid the Noise

The purpose of a financial plan is to help you achieve financial independence via a road map or strategy. Above all, it should give you peace of mind. Investment growth and tax-efficiency play a part, but these are simply tools which serve a larger purpose.

Rather than thinking about the daily ups and downs in the market, consider your goals. What would you like to achieve, and what do you need to do to get there?

An investor focused on the present may panic when the market takes a downturn as all they see is a loss. An investor who is focused on their goals, on the other hand, is better equipped to take a long-term view.

The media is full of opinions on what you should buy and sell, and when. But this is simply a distraction. If you focus on the long-term and filter out the noise, you will have a better chance of achieving your goals.

Dirk Groeneveld, Certified Financial Planner.