Market downturns: Strategies for maximising returns
Learn to navigate market downturns with essential strategies like maintaining long-term goals, staying invested through cycles, and seizing opportunities during lows to protect and grow your investments.
Market downturns have tested even the most seasoned investors. From post-pandemic disruptions to global conflicts, inflation, and rising interest rates, many are reassessing their portfolios. This is especially true for retirees, who need to balance income needs with capital preservation. With increasing living expenses and pressure on superannuation funds, financial sustainability is more crucial than ever during market downturns.
Investing wisely requires a long-term perspective, clear goals, and expert guidance. Yet in uncertain times, these principles can be easily forgotten.
Stay aligned with your financial goals
Market downturns often prompt investors to abandon their long-term strategies in favour of short-term reactions. But this can be costly.
While markets rise and fall, history shows that sticking with your plan generally leads to better outcomes. Investments in volatile assets like stocks and real estate continue to offer long-term growth and protection against inflation.
Prioritise time in the market, not timing the market
Exiting investments during a market downturn can lock in losses. Missing out on rebounds — some of which can happen quickly — can also stunt portfolio growth.
Markets are unpredictable, but data shows that staying invested tends to yield better long-term results.
Understand market downturn cycles
Markets move in cycles — this is a natural part of investing. Consider the ASX 200: despite periodic dips, it has maintained a long-term upward trajectory.
By remaining invested through market downturns, you’re more likely to benefit when recovery occurs.
Set realistic expectations
Exceptional market returns are not the norm. Over the long term, diversified assets tend to yield steady — but moderate — returns. Superannuation should be managed with a similar mindset.
Capitalise on market returns
Market downturns present the chance to buy quality assets at discounted prices. If you’re in a position to invest, consider doing so cautiously and with a clear understanding of your risk appetite.
Before making substantial investments, conduct thorough research. Remember the relationship between risk and return: High Risk – High Volatility – High Return. Always invest within a risk level that lets you sleep well at night.
A financial adviser can help you stay calm and make sound decisions during uncertain times. They’ll also help you align investments with your long-term financial goals and personal risk tolerance—key components in navigating market downturns successfully.
This general advice has been prepared without taking into account your objectives, financial situation or needs. Therefore, you should consider the appropriateness of the advice in light of your own objectives, financial situation or needs, before acting on it. You should also obtain a Product Disclosure Statement (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.
