Rather than worrying about day-to-day price movements, focus here instead. 

If you checked on the status of your investment portfolio today, don’t worry. You’re definitely not alone.

In fact, you may have looked at how your various investment holdings are faring multiple times by now, just to see how much you’ve gained or lost since yesterday.

It’s investing psychology in motion. Most of us do it, just because we can.

After all, it’s so easy these days using mobile apps or online platforms. But doing this really contradicts one of the core principles of successful investing.

Rather than being fixated on the day-to-day movements of financial markets, especially during times of heightened price volatility, what we should be doing is ignoring the constant noise around what markets are doing on a daily basis.

In the overall scheme of things, what happens today is largely irrelevant. Just like you’re unlikely to worry about changes to your superannuation balance every single day, there’s not a lot of point in worrying about daily changes to your investment balance either.

The power of compounding returns

Markets volatility is typically linked to short-term events, particularly economic conditions but sometimes geopolitical events.

Market downturns are also nothing new. They do happen, for a range of reasons.

Think back to 2020 when financial markets fell more than 30% over just a couple of weeks as investor panic set in over the spread of COVID-19.

It was a disturbing period for most investors, but within a short time markets had already started to rebound very strongly.

It’s an important lesson for all investors. Which is why Vanguard produces a chart every year showing the total investment returns from a range of different asset classes over a 30-year period.

Among other key events, the last 30 years includes both the 2007-08 Global Financial Crisis and the 2020 COVID-19 market crash.

The Vanguard Index Chart proves year after year that even a low initial investment balance will grow substantially over time when combined with compounding investment returns.

Sticking to a long-term investment plan, with diversification across a range of asset classes, allows you to grow your wealth even in the face of market crises and short-term volatility.

There’s nothing inherently wrong with checking your investments daily, weekly or monthly.

However, regardless of daily events, what’s most important is to stay focused on your investment goals and your overarching strategy to achieve them.

Investors who stay the course over time, riding through the regular ups and downs of the markets, have a much better chance of achieving investment success than those who take short-term positions and try to time when to buy and sell.

Important information and general advice warning

Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee of Vanguard Super (ABN 27923449966) and the issuer of Vanguard Super products. The Trustee has contracted Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) to provide some services to members of Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc. (collectively, “Vanguard”). The retirement savings tips provided above are general in nature and don’t take into account your personal financial objectives, situation or needs. You should consider your objectives, financial situation or needs, and the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before making any decision about Vanguard Super. The PDS and TMD can also be accessed free of charge by calling 1300 655 101. Before you make any financial decision regarding Vanguard Super, you may wish to seek professional advice from a suitably qualified adviser. Any past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. The information above is current as at time of publication and was prepared in good faith and we accept no liability for any errors or omissions. ©2024 Vanguard Investments Australia Ltd. All rights reserved.©2024 Vanguard Investments Australia Ltd. All rights reserved.