What I’m Doing With My Money During Market Volatility
Recent events in the Middle East, particularly the escalation involving Iran, have created uncertainty across global markets. When geopolitical events unfold quickly, markets tend to react just as quickly.
Over the past few days we’ve seen increased volatility in shares, movements in energy prices, and shifts in currencies as investors reassess global risk.
It’s completely normal for this to feel unsettling.
Headlines are dramatic, markets move around, and it’s natural to wonder whether you should be doing something with your investments.
So I thought I’d share a simple perspective: what I’m personally doing with my money right now and how we approach situations like this at Thomson Wealth.
First, a reminder: volatility is normal
Market volatility during global events is nothing new.
Over the past few decades markets have lived through wars, financial crises, pandemics and political shocks. In most cases markets initially react negatively or with increased volatility, before stabilising once uncertainty begins to ease.
The key point investors often forget is this:
Short-term events rarely determine long-term investment outcomes.
This is why one of the most important principles of investing is simple:
Time in the market is usually far more powerful than trying to time the market.
Trying to jump in and out of markets based on news headlines often results in investors selling when markets fall and buying back in after they recover — which is exactly the opposite of what you want.
If you read my article last November on the cycle of market emotions, you’ll remember that markets often move through predictable stages of fear and optimism.
And the hardest time to stay invested — when headlines feel the worst — is often right before markets begin to recover.
This was something I saw firsthand early in my career.
Not long after the Global Financial Crisis, I worked as a financial adviser at an industry super fund. Many retirees had moved their savings into cash when markets were falling because they were understandably worried about losing more.
The problem was that many stayed in cash even after markets started recovering. By the time they felt comfortable investing again, markets had already risen significantly.
In simple terms, they sold when prices were low and bought back when prices were higher.
Unfortunately, that meant their retirement savings didn’t last as long as they expected, and many ended up with far less retirement income than if they had simply stayed invested and ridden through the volatility.
It was a powerful lesson for me about how costly emotional investment decisions can be.
How Thomson Wealth plans for volatility
At Thomson Wealth, we don’t treat volatility as a surprise.
We expect it.
Portfolios are designed with the understanding that markets will have difficult periods. How we manage that volatility depends on several factors:
Your investment timeframe
Your risk profile
Whether you’re still building wealth or already retired
Whether you prefer indexed investing or active management
Diversification across different asset classes, countries and sectors also helps smooth the journey, because not all investments move in the same direction at the same time. Hence we rarely recommend to only invest in Aussie shares.
Active vs indexed investing in times like this
Periods of market volatility are a good reminder of the difference between active investing and indexed investing.
Indexed investing simply follows the market. If the market rises, the portfolio rises. If the market falls, it falls as well.
Active managers, on the other hand, have some flexibility to adjust asset allocations within their mandate as economic conditions change.
For example, during periods of geopolitical stress they may:
Increase defensive assets
Reduce exposure to more sensitive sectors
Hold slightly more cash
Adjust regional exposure
This flexibility is one of the reasons active strategies are typically a little more expensive than indexed investing.
Neither approach is “better” — they simply behave differently, and many clients hold a combination of both.
What this means for clients still building wealth
For clients still working and investing regularly, volatility can actually be helpful.
Most accumulators invest monthly through super contributions or investment plans.
When markets fall, those regular contributions buy investments at lower prices — something known as dollar-cost averaging.
Over long periods, this can improve long-term outcomes because you’re buying across different market conditions rather than trying to guess the perfect time to invest.
So for most people still building wealth, the best response during market volatility is often the simplest:
Keep investing and stay focused on the long term.
What this means for retirees
For clients already retired, the strategy is slightly different.
Many of our retirement portfolios are structured to help manage what’s known as sequencing risk — the risk of needing to draw income from investments during a market downturn.
We manage this in a few ways.
Some portfolios follow a risk-targeted active investment approach, where the portfolio manager actively manages the level of risk within the portfolio.
Others use a bucket strategy, where we hold:
Cash for short-term spending
Term deposits for medium-term needs
Growth investments for long-term growth
Some clients also choose to allocate part of their retirement savings to annuities, which provide a guaranteed income stream regardless of what markets are doing (and can sometimes increase Centrelink Age Pension entitlements😊).
This structure means retirees don’t have to sell shares during market downturns to fund day-to-day living expenses.
What about gold?
Whenever geopolitical tensions rise, gold often gets attention as a “safe haven”.
Gold can play a role in a diversified portfolio and historically has sometimes performed well during periods of uncertainty.
However, that doesn’t mean investors should rush to sell everything and move into gold — particularly when the gold price is already elevated.
Like any asset class, gold has cycles and volatility of its own. It also doesn’t generate the regular income many retirees rely on to fund their retirement.
In most cases, it works best as one component of a diversified portfolio, rather than the centrepiece.
The bottom line
Events like the current Middle East conflict can certainly create short-term market volatility.
But history shows that markets eventually move past geopolitical events and return to focusing on long-term economic growth.
For investors, the most important things remain the same:
Stay diversified
Avoid emotional decisions
Focus on long-term goals
Stick to a well-designed investment plan
That’s exactly how I manage my own investments — and it’s the same disciplined approach we apply for clients at Thomson Wealth.
If recent market movements have raised questions about your own investments, feel free to reach out.
Sometimes a quick conversation and a reminder of the long-term plan can provide the reassurance people need during uncertain times.
If you’ve been wondering whether your portfolio is positioned correctly for this kind of volatility, feel free to book at 15min chat.