Don't Panic... But Do Something

Volatility provides an opportunity to cull a portfolio and also look for opportunities

- Ross Greenwood

Volatility … the enemy of the long-term investor and the exposed. Volatility ... the friend of the agile and the cashed up.

As share prices lurched in the past couple of months, investors have again been left to wonder their best strategy in surging but increasingly volatile markets.

The common cry is: “Don’t panic!” It’s true that panic never helps but certainly urgent action – be it buying or selling – is often the prudent course. Doing nothing simply leaves you exposed to potential losses or blind to opportunity.

Go back to the premise of the stockmarket, or any market for that matter. Buy when prices are low, sell when they are high. That part is easy to understand. The harder part is trying to interpret when markets are low or high.

But even here there are some good gauges. Look, for example, at how much a market has run since its clearly obvious previous low. In the case of the All Ordinaries index, you can see it around February 2016, when the world wondered about Greece’s solvency and Europe’s ability to cope.