Morgan Stanley
  • Ideas
  • Mar 19, 2020

Coping With Volatility

Revisiting some fundamental principles of investing may help ease your mind.

As markets digest the economic impacts of the coronavirus (COVID-19), volatility has increased and there have been meaningful falls on global exchanges. At times like this, it’s helpful to revisit the fundamentals of investing to remind yourself that you’re well-prepared to weather these short-term dislocations. 

Follow your long-term plan

Don’t base investment decisions on day-to-day market movements. When you set your investment plan with your adviser, you knew there would be periods of volatility. Remind yourself of your financial plan and take comfort in the fact that it is designed to withstand these ups and downs. 

Use diversification

The most effective way to cushion your portfolio from sudden market movements is through diversification. A well-balanced portfolio will move less significantly than the headline numbers you see on the news.

Recent experience has shown this to be the case. Over the past few weeks, allocations to fixed income have held up relatively well and reduced the impact of falling equity markets on diversified portfolios. In addition, global assets have benefited from a declining Australian dollar, further benefiting diversified Australian investors.

Finally, your allocation to cash enables you to meet day-to-day income needs without selling assets at an inopportune time. It also provides ‘dry powder’ to take advantage of a future entry point in equities. 

Don’t try to time the market

Buy low, sell high sounds like good advice. Unfortunately, it rarely is. Experienced investment professionals will tell you it’s impossible to accurately pinpoint the top or bottom of a market cycle ahead of time.

When making changes to your portfolio, be deliberate, measured and data-driven. This means speaking with your financial adviser to determine if any actions need to be taken to address your specific circumstances.

Revisit your budget

Now is a great time to revisit your budget and look for discretionary expenses that you can trim while uncertainty and volatility is high. 

Speak to your financial adviser

Above all – reach out to your financial adviser if you have any concerns. They can help you look through the immediate ups and downs and remind you of your long-term strategy. They also have access to the world-class insight generated by Morgan Stanley’s global team of economists, analysts and strategists. 


For more on managing your portfolio, speak to your Morgan Stanley financial adviser or representative. Plus, more Ideas from Morgan Stanley's thought leaders.