When markets drop you may feel like selling down your investments and moving into cash, but zoom out and you'll find market drops are surprisingly common.
In partnership with:
You’re on a long drive with your mates when it suddenly starts raining. Do you:
When markets get volatile, investors tend to face the same choice. The instinct is to hit the brakes - sell equities, move into cash, wait it out.
It feels like the safe option. But stopping for every drop of rain would stop you from getting to your destination on time… or ever!
Similarly, overreacting to short-term market volatility can slow you down… and even cost you the smooth ride toward your long-term financial goals.
This is when it’s good to look back and see what history has taught investors - staying in the driver’s seat, even when the rain rolls in, is often the smarter move.
Market drops can feel dramatic in the moment but zoom out and you’ll find they are actually surprisingly common.
Over the past 50+ years, global markets have fallen 10% in more than half of those years, and 20% drops have happened more than a dozen times.
Despite the big dips that happen along the way, data shows that the average gains have far exceeded the losses, sometimes within the same year.
Here’s the thing. Market recoveries tend to happen in short, sharp bursts… and often while investor sentiment still feels negative.
That means if you’ve moved your investments to the sidelines, there’s a real risk you miss the best comeback days… which tend to drive a huge chunk of long-term returns.
Translation: by the time it feels safe to invest again, the market may have already moved.
Sitting on cash during volatile periods might seem smart, but the long-term data says otherwise.
Investors who tried to dodge volatility by moving in and out of the market significantly reduced their returns. In some cases, they gave up as much as 80% of potential gains.
Even “disciplined” strategies that only moved to cash during extreme volatility still underperformed compared to investors that stayed in the market.
If keeping up with the markets feels like running an endless race, active fund managers might just be your shortcut.
These investing pros go beyond the usual big-name stocks, to uncover under-the-radar gems and emerging opportunities across the globe.
Discover how active strategies such as the Schroder Global Equity Alpha Fund can help build resilient and dynamic portfolios in today’s fast-changing global landscape.
Flux Disclaimer
All information contained in the Flux app, www.flux.finance, www.joinflux.com, app.flux.finance and any podcast of Flux Media Pty Ltd (ABN 27 639 804 345) is for education and entertainment purposes only. It is not intended as a substitute for professional financial, legal or tax advice. While we do our best to provide accurate information on the podcast, we accept no responsibility for any inaccuracies that may be communicated.
Flux does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) and ASIC RG 36.66. Flux Technologies Pty Ltd provides general advice on credit products under our own Australian Credit Licence No. 530103. The product information presented does not constitute an offer and we are not recommending or suggesting any particular product.
Schroders Disclaimer
This document is issued by Schroder Investment Management Australia Limited (ABN 22 000 443 274, AFSL 226473) (Schroders).
This document does not contain and should not be taken as containing any financial product advice or financial product recommendations. This document does not take into consideration any recipient’s objectives, financial situation or needs. Before making any decision relating to a Schroders fund, you should obtain and read a copy of the product disclosure statement available at www.schroders.com.au or other relevant disclosure document for that fund and consider the appropriateness of the fund to your objectives, financial situation and needs. You should also refer to the target market determination for the fund at www.schroders.com.au. All investments carry risk, and the repayment of capital and performance in any of the funds named in this document are not guaranteed by Schroders or any company in the Schroders Group.
The material contained in this document is not intended to provide, and should not be relied on for accounting, legal or tax advice. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this document. To the maximum extent permitted by law, Schroders, every company in the Schroders plc group, and their respective directors, officers, employees, consultants and agents exclude all liability (however arising) for any direct or indirect loss or damage that may be suffered by the recipient or any other person in connection with this document.
Opinions, estimates and projections contained in this document reflect the opinions of the authors as at the date of this document and are subject to change without notice. “Forward-looking” information, such as forecasts or projections, are not guarantees of any future performance and there is no assurance that any forecast or projection will be realised. Past performance is not a reliable indicator of future performance. All references to securities, sectors, regions and/or countries are made for illustrative purposes only and are not to be construed as recommendations to buy, sell or hold.
Sign up for Flux and join 100,000 members of the Flux family
