Don't Panic: Investment Rules for Market Volatility

How to Stay Calm and Invest Smart: Navigating Market Volatility with Confidence

Investing comes with a set of principles that many of us have heard before, but it often takes a bit of market volatility to truly understand their importance. We share the 3 golden rules when investing, and provide you with our perspective on the current market volatility impacting financial markets.

The number one rule in investing? Don’t panic.

Rule #1: Don’t Panic

Unless you’re involved in a private, illiquid investment where you don’t fully understand the assets and cash flows, the best course of action in a volatile market is to stay calm. Given enough time, almost all investment classes recover and grow. While individual investments can fail, a well-diversified portfolio generally benefits from market resilience—provided you don’t panic.

Rule #2: Time in the Market vs. Timing the Market

This means invest and stay invested. The temptation to time the market often leads to costly mistakes. Successful investing is about patience and letting your money grow over the long term, rather than trying to jump in and out at the perfect moment.

Rule #3: Buy Low, Sell High

It sounds simple and logical—until emotions get involved. When markets decline, the instinct is to sell and “cut your losses.” However, if you truly follow this rule, a downturn like we’re experiencing right now is an opportunity to buy, not sell. (But refer to Rule #2 first!)

Understanding the Current Market Movements

Let’s put today’s market conditions into perspective.

As of March 13, 2025, the ASX 200 is down 9.4% from its peak. That’s why it’s making headlines. However, what’s not making the news is that the market is still up 0.46% for the year.

The S&P 500 has dropped 9.7% from its peak, performing worse than Australia. But again, the key detail missing from many reports is that the index is still up 6.90% for the year.

If you only listened to the headlines, you might think the sky is falling. In reality, the market is experiencing a correction, not a crash. A little perspective goes a long way.

The Trump Tariffs & Market Reactions

The recent market movement is largely due to the impact of Trump’s tariffs, which the media has branded the “Trump Slump.” However, Trump has already reversed some tariffs, which suggests he is using them as a negotiation tactic rather than a long-term policy. At his core, Trump is a deal-maker and negotiator who is attempting to reshape the U.S.’s global trade position.

The bigger prize on the horizon? Proposed Trump tax cuts. Trump has even floated the idea of eliminating income tax altogether—a bold and ambitious goal. While this may seem extreme, it’s worth noting that many countries, including Australia, introduced income tax as a temporary measure during wartime.

If Trump succeeds in pushing through major tax cuts, the global markets will likely respond positively. The U.S. has long been the world’s largest consumer economy, and eliminating income taxes would significantly boost spending and economic growth.

Market Adjustments & Investment Strategy

For Trump’s tax plan to work, the U.S. government needs to find significant budget savings and execute them. This will likely impact certain sectors that rely on public spending, causing short-term dips in affected industries. However, shifting spending from government control to consumer control will create new opportunities.

The U.S. government has already passed legislation to extend the debt ceiling until September, giving Trump time to push his tax reforms through Congress. Markets are watching closely, and investors who understand these shifts will be in a strong position.

What Should Investors Do Now?

Markets will always shift, creating winners and losers. The key to navigating these movements successfully is having a well-structured investment approach.

• Active investment managers, which we primarily use, are already adjusting portfolios to capitalize on upcoming changes.

• Index managers, on the other hand, passively track the market and only react after the fact.

So, we return to Rule #1: Don’t Panic. Stay patient, keep perspective, and trust in a sound investment strategy. Short-term volatility is normal, but well-diversified, actively managed portfolios are designed to weather these fluctuations and position you for long-term success.

If you still  feel uncertain or uncomfortable with your current investments, please don't hesitate to reach out us. Our aim is to provide you with personalized guidance to help you navigate through market volatility with confidence.

Disclaimer: The views expressed in this document are our own and do not constitute financial advice. For personalized advice, please refer to your financial adviser.