As investors, our nerves are tested often, with COVID-19 being the latest example. This usually leaves us with many questions:

How far is too far to fall?

Is it time to cash in?

Will there be a better time to buy back?

This can be a daunting experience, especially if you are new to investing and haven’t yet experienced a turbulent market. These questions can keep you up at night, pushing you to cash in because it seems like the right thing to do. But is it the smart choice?

Here are a few reasons to keep a level head during volatile times:

The markets always bounce back: Disasters are nothing new. Over the years, we have experienced both man-made and natural disasters, but the markets have always bounced back – and COVID-19 will be no different. Always remember that time in the market will always beat timing the market. Downturns are usually followed by strong rebounds – meaning that in addition to cashing in at a loss, you will also lose out on some of the best days in the market if you exit due to fear. This is why it pays to weather the storm and hold onto your investments.

Volatility brings out the best in companies: Companies are constantly experimenting with new ideas and strategies, but sometimes, can become complacent in their implementation. Volatility can force these companies to prioritise the best ideas and strategies and aggressively pursue their execution – eventually trickling down to investors in the form of higher returns.

The benefits of staying calm during volatile times are clear, but maybe you still aren’t convinced due to the fear of losing your hard-earned money. Here are a few tips that will help mitigate your losses when investing:

Think long-term: As mentioned previously, a strategy of time in the market will always beat trying to time the market. No one can predict how the markets will move, and staying invested over the long run will allow you to benefit from compounding, make better informed decisions and reduce your exposure to volatility. If you haven’t already read about our article on investing over the long-term, you can find it here

Invest smart: Before you invest, do your research to make sure that you only invest in fundamentally strong companies. Investing in companies with a proven track record will give you the confidence in knowing that they can weather the storm and generate returns for you over the long run. While chasing quick gains by buying low and selling high can be exciting, this strategy is likely to leave you disappointed if the companies you have invested in can’t bounce back after a tough period.

Pay attention to your asset allocation: Your asset allocation is one of the most important investment decisions you can make. The same market conditions that cause one asset class to perform well, can also be the same conditions that cause others to underperform – and this is why it is important to have your money allocated across stocks, bonds and cash. To dig deeper into the benefits of having the right portfolio, read our article here.

While having your money invested during volatile periods can be a frightening experience, staying the course will eventually reap rewards. If you are unsure about the actions that you need to take, it might be a good idea to speak to financial planner that can guide you through these decisions