Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 374

Four simple things to do right now

This is a challenging time for investors. While stock markets have recovered from their late March 2020 lows, there are signs the impact of COVID-19 and nervousness about the US election are worrying markets. The S&P/ASX200 index has fallen in each of the last four weeks. The tech stocks that have run the hardest and supported the broader index have spluttered with a 10% correction in the NASDAQ in the last two weeks. The market is facing the reality that a vaccine is unlikely in 2020.

Here are four things to help in navigating the sea of news.

#1. Take responsibility

How we respond to coronavirus matters.

It’s not what other people do in times like this that create problems; it’s what we do. There are no ‘other people’. It’s true for our investments, and it’s also true for our mental health right now.

Panic is a social phenomenon, whether it’s panicked selling of investments or panicked buying of hand sanitisers. Sure, there’s an underlying trigger, but our actions and our tone have the power to either turn that trigger into a crisis or into a blip that we quickly see in the rearview mirror.

Personally, as a contrarian investor, I try to identify buying opportunities when there’s a down market. Rebalancing as a tactic also helps counter the crazy. By buying when others aren’t, we help limit the carnage, in our small way. And that helps real people avoid potentially dire situations.

As many studies at Morningstar and beyond have shown, people lock in their losses by pulling out at the bottom of a down market. It’s not the stock market decline itself that hurts them per se. It’s that they exit and then miss out on the subsequent market upswing.

That’s a serious loss for retirees living off their investments or young families planning for their first house purchase. It means cutting back, living on less, and perhaps not even being able to pay the bills.

Buying when others aren’t helps decrease the chance that people will panic and pull out, and it softens the blow if they later do. Keeping our heads and thoughtfully evaluating our investments means, ever so slightly, smoothing things out for everyone else.

Steve Wendel is Head of Behavioural Science for Morningstar.

#2. Use volatility to point you in the right direction

Use the volatility that you've seen in your portfolio as a gut check. If you feel that your portfolio value has fluctuated too much, that probably means that you're taking on too much risk.

Consider using all the attention and energy that the market turbulence has brought out in you to take the time to reconsider your risk tolerance and recalibrate your long-term asset allocation decision, or the mix between stocks, bonds and other asset classes, and ensure that it's appropriate for the level of risk that you can comfortably take on as opposed to making a short-term tactical change in your portfolio.

Ian Tam is Director of Investment Research at Morningstar.

#3. Do not try to time the market

Although it sounds easy, pulling out of the market and then waiting for a correction is something that very few people and investors can do effectively and consistently. My colleagues, Dr. Paul Kaplan and Dr. Maciej Kowara have authored a few papers around this topic. For one, they ran a study of about 304 Canadian equity funds over a 15-year period ending October of 2018 and found that on average, there were only eight critical months of performance that a fund's history depended on to beat its own benchmark. Of course, if you weren't invested during those critical months, you too would have failed to beat the benchmark.

So, investing early and staying invested over the long term is really the only way to ensure that you catch these critical months. The path to financial freedom is a marathon and not a race.

Ian Tam is Director of Investment Research at Morningstar.

#4. Use time to your advantage

The airwaves are saturated with coronavirus coverage. Buy, sell, hold, don’t panic, panic, get supplies, wash your hands. What should you do?

Only time will tell what the best moves were and when, but one thing that we strongly encourage at Morningstar is that you use time to your advantage. That means first avoiding ‘un-doing’ the power of time in your portfolio by panicking. Quality investments have seen dramatic drops in value in the past, and they’ve recovered. And depending on your retirement goals, that may mean that the red you see today could be a flashing buy sign for certain stocks in the long game. You won’t know when markets hit the bottom, and you won’t know when a bump is a bull trap.

Go with what you know. The rules you set for yourself and the power of compounding and diversification remain constants amidst the chaos. Pair this with reliable sources of information and you’ll find less of a reason to panic about your portfolio when it comes to this pandemic. Save your energy to focus on what matters most: the health of you and your family, friends and neighbours.

By Andrew Willis is Content Editor at Morningstar.

This article is general information and does not consider the circumstances of any investor.


Try Morningstar Premium for free


 

RELATED ARTICLES

How do your financial priorities stack up with our pyramid?

Choosing your investment strategy is like a road journey

Four checks for a financial fire drill

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Economy

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Investing

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Property

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Shares

ASX reporting season: Room for optimism

Despite mixed ASX results, the market has shown surprising resilience. With rate cuts ahead and economic conditions improving, investors should look beyond short-term noise and position for a potential cyclical upswing.

Property

A Bunnings play without the hefty price tag

BWT Trust has moved to bring management in house. Meanwhile, many of the properties it leases to Bunnings have been repriced to materially higher rents. This has removed two of the key 'snags' holding back the stock.

Investment strategies

Replacing bank hybrids with something similar

With APRA phasing out bank hybrids from 2027, investors must reassess these complex instruments. A synthetic hybrid strategy may offer similar returns but with greater control and clearer understanding of risks.

Shares

Nvidia's CEO is selling. Here's why Aussie investors should care

The magnitude of founder Jensen Huang’s selldown may seem small, but the signal is hard to ignore. When the person with the clearest insight into the company’s future starts cashing out, it’s worth asking why.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.