The current volatility in the financial markets has many Australians checking their investment portfolios with a sense of unease. Over the past few weeks, global share prices have softened significantly, with the ASX 200 retreating from its recent record highs to its three-month low on 16 March 2026.
This downturn is largely driven by the ongoing conflict in the Middle East, specifically involving Iran. The blockade of the Strait of Hormuz – a vital passage for the world’s oil – has sent energy prices soaring, with Brent crude recently surpassing $100 per barrel, according to CommBank. This “energy shock” has reignited fears of stagflation, where economic growth slows down while inflation remains stubbornly high. Consequently, the Reserve Bank of Australia (RBA) has raised interest rates further on 17 March 2026 to combat these price pressures.
While these headlines are daunting, history suggests that how you think about a downturn matters more than the downturn itself.
1. Preparing the ‘Ark’ Before the Rain
Warren Buffett is a proponent of the “Noah rule”: predicting rain doesn’t count, but building arks does. Buffett rarely tries to guess the exact day the market will hit rock bottom. Instead, he ensures he has “dry powder” or cash reserves to take advantage of opportunities when others are fearful.
In a practical sense, ensure your own “ark” is sound by:
- Maintaining an emergency savings buffer so you aren’t forced to sell shares at a low point.
- Reviewing your household budget to manage the rising cost of living and potential interest rate hikes.
2. Viewing Volatility as a ‘Sale’
Peter Lynch, one of the most successful fund managers in history, often compared market drops to the weather. He argued that corrections are a normal part of the cycle. Lynch famously noted that “far more money has been lost by investors preparing for corrections than has been lost in the corrections themselves.”
For a local investor, this means resisting the urge to sell in a panic. If you liked a company or an index fund at January’s prices, it is technically even more attractive now that it is 10% cheaper.
3. Embracing the ‘All Weather’ Approach
Ray Dalio, the founder of Bridgewater Associates, advocates for a portfolio designed to withstand any economic season. His “All Weather” philosophy suggests that because we cannot predict geopolitical events like the current Iran crisis, we should own a diversified mix of assets.
By spreading investments across different sectors (such as healthcare, technology, and energy) and different asset classes (shares, bonds, and gold), the impact of a crash in one specific area is dampened.
4. Quality Over ‘Cheap’
The late Charlie Munger always pushed for simplicity and quality. He shifted Buffett’s focus away from buying struggling companies just because they were cheap, toward buying wonderful businesses at a fair price.
During a downturn, low-quality companies often struggle to recover. Munger’s wisdom suggests looking for businesses with strong balance sheets and the ability to pass on costs to customers which is a vital trait when inflation is high.
Sensible Next Steps
It is perfectly normal to feel a sense of ‘sticker shock’ when checking your portfolio during these times. However, history shows that these periods are often where long-term wealth is built. It is important to remember that time in the market is generally more effective than trying to time the market. Focusing on your long-term goals helps put these temporary price movements into a clearer perspective.
Practical habits can help manage the emotional side of investing. For instance, dollar-cost averaging — investing a set amount at regular intervals — allows you to naturally buy more shares when prices are low and fewer when they are high. Broad diversification, perhaps through Exchange Traded Funds (ETFs), ensures your future isn’t tied to the success of a single company. Most importantly, remember that the Australian market has a consistent track record of recovering from major setbacks.
If you are feeling uncertain about your specific situation or how to manage your portfolio during this period of volatility, we encourage you to contact us. Our team of professional advisers is available to provide personal investment advice tailored to your financial goals and risk tolerance.
