Riding the waves: strategies to handle market volatility

Tue 07 April 2026

Investor Update

ASX

Four experts outline how to avoid making bad decisions when volatility spikes.

Key points

This article considers how elevated market volatility can affect investors.
Key risks include overreacting to market noise and making sudden investment decisions.
The experts argue that understanding your investment goals - and yourself - are the best ways to navigate market uncertainty.

Nobody likes waking to news of Wall Street tumbling overnight or watching experts warn of further sharemarket falls.

When markets slump, checking your investment portfolio or superannuation each day can hurt. The latest market shock - in this case the US-Israel war with Iran - has caused a significant pullback in global equity markets [1].

As painful as it is, occasional market shocks and high volatility are a normal part of long-term investing. In some respects, higher volatility is commonly associated with equities, which have historically delivered higher returns than some other asset classes over long periods, although outcomes vary and are not guaranteed [2].

That said, volatility spikes can lead to knee-jerk decisions if investors fear their portfolio will fall further and struggle with market uncertainty.

Every investor, of course, is different, meaning there is no general rule of how to handle market volatility. Nevertheless, the experts featured in this article present common themes around the value of having a financial plan, investing for the long-term and not making rash investment decisions.

Always consult a licensed financial adviser or do further research of your own before acting on themes in this article to handle market volatility.

Here are the four experts:

Tania Smyth

Financial Adviser, Morgans
Key takeaway: Understand the risks of trying to time the market.

Investors may make two key mistakes when the share market falls. First, they get nervous and make sudden changes to their portfolio - such as selling shares and moving to cash. The changes deviate from their original investment plan.

Second, investors try to time the market. They sell during volatility to minimise potential future losses, believing they can buy back later at lower prices. By the time they do so, the market has usually recovered, so they miss out on dividends and pay unnecessary transaction costs.

Timing the market is hard - even the experts can get it wrong. Vanguard research shows that market sell-offs from geopolitical shocks have historically been short-lived [3]. Also, that Australian equities have delivered a positive annual return in 100 of 124 years (since 1900) [4].

Tania Smyth, Morgans

Historically, the odds favour long-term investing in equities and not making big portfolio changes in response to market shocks.

Investors can do a few things when faced with uncertainty during higher volatility. Remind yourself of your original investment plan: why did you invest in the first place? What are your investment goals and have they changed? The main thing is making considered decisions: not reacting to short-term events.

Longer term, focus on asset allocation, diversification and periodic rebalancing to ensure the portfolio remains aligned with your investment goals.

Ron Hodge

CEO, InvestSMART
Key takeaway: Understand your emotional response during volatility.

In volatile markets, the biggest mistakes are usually emotional. Panic selling after a sharp fall is a big one because it can lock in losses. Moving to cash after the market has already dropped is another. So is waiting too long to get back in, because by the time things feel safe again, markets may have recovered.

Volatility tends to bring out human biases. Loss aversion makes losses feel more painful than they are. Recency bias makes investors think a bad stretch will keep going. Availability bias means the loudest headlines feel like the most likely outcome. That’s often when investors abandon diversification, chase whatever feels safest, or check their portfolio so often that emotion starts driving decisions.

Ron Hodge, InvestSMART

The first thing is to remember that volatility feels awful when you’re in it, but it’s normal. Markets do not move higher in a straight line; occasional sharp falls are part of the journey. It’s also important to avoid making knee-jerk decisions. When markets are volatile, it’s easy to feel like you need to act, but that can lead to decisions that hurt long-term returns.

A better approach is usually to stay calm and stick to the plan. Keep contributing regularly if you can, avoid checking your balance too often and don’t make sudden changes just because markets feel uncomfortable.

It also helps if your portfolio is built for this in the first place. Diversification matters because if you’re spread across different assets, sectors and markets, one event is less likely to do all the damage.

Your timeframe matters, too. Money you may need in the short term generally should not be exposed to sharemarket volatility, while long-term money has more time to recover.

Shani Jayamanne

Director, Investment Specialist, Morningstar Australia
Co-author of ‘Invest Your Way’
Key takeaway: Take a long-term perspective to investing.

Heightened market volatility can trigger a primary reaction in investors. We see the volatility and sharemarket falls as a threat, similar to a physical danger, which can make it difficult for some investors to act rationally.

Often, when people see the value of their portfolio fall, they become fearful and see it as a permanent loss, even though sharemarkets tend to rise over time.

Also, the ‘herd mentality’ can be dangerous. When we hear what other investors are doing, we feel pressure to act and stop the threat. This can lead to panic-selling and investment decisions we later regret.

Shani Jayamanne, Morningstar - IU June 2022

Shani Jayamanne, Morningstar Australia

Morningstar’s latest annual Mind the Gap study estimated the difference between the market return and investor returns was 1.2% in in 2025. That looks small, but earning 1.2% on average less than the market, when compounded over a long-term time horizon, is huge. The reason for the gap was overtrading: the more investors traded, the less they made.

Our advice during volatility is to reconnect with your original investment goals. Does a short-term market event affect your long-term investment goals?

Other advice I’ve heard is simply to ‘zoom out’ when looking at market charts during volatility. Rather than just consider a stock over one year, look at the chart over five, 10 years or longer. That could give you a more-informed perspective on current market volatility.

Chris Brycki

CEO
Stockspot
Key takeout: Make volatility work for you through regular investing.

Part of the problem is how often we now see market movements today. Trading apps and constant news alerts mean investors are exposed to every small market swing. That can make volatility feel much more dramatic.

In reality, these swings are normal. Over the past century, the Australian sharemarket has typically fallen about 5% several times most years (while ending the year positive), according to Stockspot internal analysis.

Our analysis shows falls of around 10% happen roughly every one to two years for Australian shares. Falls of 20% tend to happen every five to seven years. Larger bear markets of 30% or more are less common but still part of investing history like in 2008 and 2020.

Chris Brycki, Stockspot

Importantly, when you zoom out over decades these falls are clearly temporary setbacks within a much longer upward trend.

The first step is recognising that volatility isn’t a sign something is broken. It’s simply how markets process new information. Markets constantly adjust expectations about growth, inflation and interest rates. Those adjustments create price movements.

Regular investing can help. When investors contribute consistently, market dips allow new investments to be made at lower prices. Over time that lowers the average purchase price and strengthens compounding. Automatic investing and portfolio rebalancing can remove emotion from the process and ensure portfolios stay aligned with long-term goals.

From ASX

Start Investing on the ASX website has information for first-time investors.

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[1] The MSCI World Index has a year-to-date return of -1.16%, to March 16, 2026.

[2] 2025 Vanguard Index Chart. You can download chart from the site to view US and Australian equity returns since 1995.

[3] Vanguard, ‘Geopolitical Sell-Offs Have been Short-Lived’. At 31 December 2021.

[4] Market Index, ‘Australian Sharemarket: 124 years of Historical Returns’. Refers to All Ordinaries Accumulation Index from 1900 to 2023.

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