Markets

Extreme market volatility can create panic and often prompts investors to sell assets, especially equities and stocks, in search of a “safe” asset class, such as bonds or cash.

However, moving out of these asset classes can cause you to miss out on days of recovery and extreme growth, such as the 9% single-day upswing we saw on 9 April.

Market corrections, like the one we are currently in, are quite common. They happen roughly every 18 months, but they are always highly publicised and portrayed as the next big disaster, as fear tends to sell better than optimism.

Below is an excellent example of staying invested vs making changes when big market shocks or volatility happen.

The scenarios are for pensioners who stay invested (using the example of the Ninety One Opportunity fund), moving in and out of funds into cash when extreme events occur, such as the 2008 financial crisis and the 2020 COVID-19 pandemic. (Source: Ninety One Asset Managers)

From the graph above, it is clear that staying invested, even though it may feel unnatural, remains the best strategy in the long run.

Market volatility also brings great discounts on various shares, and fund managers are already taking advantage of some of the discounts available, so they can actually turn into great opportunities.