• It is important to always do your own research before making decisions about investing.      

• This article was produced on 9 May 2025.  

• Past performance is not an indicator of future performance. 

Periods of market volatility are an inherent reality of investing, but that doesn’t make them any less unsettling. For many Australian investors – particularly those who may be newer to the share market – the sight of falling prices can understandably stir up worry and second-guessing. 

In uncertain times, one of the most valuable tools available to investors isn’t a prediction model or a hot tip. It’s reflection. Checking in with your investment mindset and strategy can help you stay grounded and make decisions that align with your long-term goals.  

Below are five key questions to ask yourself when the market takes a hit. Each is designed to help you move forward with clarity and confidence. 

1. Has my investment time horizon changed?  

Markets move up and down in the short term, but they have historically trended upward over the long term. If your goal is retirement in 20 years or saving for your child’s education in ten years, a short-term dip is unlikely to materially affect your plan. Past performance is not an indicator of future performance. 

Tips to reflect on this question: 

• Revisit your goals and timeline – have they shifted? How so? 

• Consider ASIC’s Moneysmart free investor toolkit to help frame your long-term outlook. 

• Ask yourself: Would I still invest today if I hadn’t seen the latest headlines? 

2. Am I diversified across sectors, asset classes, and geographies? 

Australians can often exhibit a “home bias” toward domestic equities, especially Financials and Resources. While these sectors have historically performed well, overexposure can potentially amplify portfolio risk during sector-specific downturns.

Tips to reflect on this question: 

• Check your portfolio's sector and geographic mix. As a Selfwealth customer, you can take advantage of the SafetyRating tool from within your Dashboard. SafetyRating measures the diversification of your Portfolio. Your SafetyRating is calculated by Selfwealth based on the number of holdings in your Portfolio, how evenly your Portfolio is spread across different holdings, a measure of the number of holdings considered lower risk in your Portfolio (such as shares listed on the ASX100, cash and interest rate securities) and on the different types of asset classes in your Portfolio.  

• Review your exposure to a variety of asset classes.  

• Consider whether your diversification reflects your risk tolerance – not just your familiarity with securities. 

3. Am I reacting emotionally or acting on a plan?  

 Emotional decisions in investing – panic selling, for example – can result in locking in losses and missing out on recoveries. A written investment plan or “investment policy statement” can help anchor your actions to reason, not reactions. 

Tips to reflect on this question: 

• Speak to a professional financial adviser if you're feeling particularly uncertain. 

• Journal your reactions to the market drop and compare them to your plan. Consider the common psychological barriers that can lead to poor outcomes. 

• Remember Warren Buffett’s advice: “Be fearful when others are greedy, and greedy when others are fearful.” 

4. Do I have an understanding of what’s driving the market drop? 

Market movements are often caused by macroeconomic or geopolitical news – interest rate changes, inflation data, conflicts, or economic forecasts. Understanding the root causes can reduce anxiety and help separate temporary volatility from structural shifts. 

Tips to reflect on this question: 

• Consider whether you are consuming information from a diverse variety of reputable international and local sources, or whether you are instead relying too heavily on one or two. 

• Be careful when listening to the opinions of friends and colleagues, each of whom can bring their own biases into financial discussions. 

• Ask yourself: is this a systemic issue or a short-term shock? 

• Keep up to date with news from reputable research providers, including ETF issuers where relevant. 

5. Is this an opportunity to invest more at lower prices? 

Market downturns can often present opportunities for long-term investors to buy quality assets at discounted prices. Known as ‘dollar-cost averaging’, consistently investing over time can smooth out market volatility. 

Tips to reflect on this question: 

• Review your budget and cash flow: Can you invest more now without compromising your financial stability? 

• Consider setting up automated calendar reminders to remove timing pressure. 

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Volatility is a feature, not a flaw, of investing. By taking a step back and asking these five questions, you equip yourself to make decisions based on strategy – not stress. Remember: successful investing is less about reacting to the market and more about sticking to your plan through all its ups and downs.