How the Media Fuels Fear During Market Volatility (and How Smart Investors Win)
Market volatility is a natural part of investing in global share markets. Over the past 26 years as a financial adviser, one lesson has stood out: while short-term market movements are driven by fear and greed, the long-term rewards belong to those who remain patient and focused.
But here’s the twist: the media doesn’t make it easy. Bad news sells, and during periods of market correction or crashes, fear-mongering headlines dominate. So, how can investors navigate these emotions and make volatility work in their favour?
The Media’s Role in Fear and Panic
We’ve all seen the headlines: “$100 Billion Wiped from Markets in One Day!” These phrases are designed to grab attention and spark anxiety. As a less experienced adviser, I used to find this frustrating. But over time, I’ve come to see these moments of fear differently.
Here’s the reality: when pessimism peaks, opportunities arise. Corrections and crashes, while unsettling, are often the times when the best long-term investments can be made.
The Nature of Volatility
Global share markets have historically delivered average returns of 10-11% per year, but these gains don’t come in a straight line. Short-term market movements are unpredictable and often emotional:
- Greed: During bull markets, investors push valuations higher than they might deserve.
- Fear: In bear markets, panic can drive prices far below their true value.
Are Markets Overvalued?
As of November 2024, markets had experienced an incredible run over the past 12 months. While this has been rewarding for investors, it also raises questions about whether current valuations are stretched beyond fair value. Greed often drives this kind of exuberance, with investors chasing short-term gains and pushing prices to levels that may not be sustainable. Historically, periods of overvaluation are often followed by corrections or crashes. This doesn’t mean panic—it means preparation. Smart investors use these moments to step back, reassess their portfolios, and position themselves for the opportunities that inevitably follow.
The Opportunity in Fear
One of my favourite quotes comes from Charlie Munger of Berkshire Hathaway:
“The big money is not in the buying and selling, but in the waiting.”
This perfectly captures why patient investors thrive during volatile times.
When fear is at its peak—when you see uncertainty in the eyes of your friends and neighbours—that’s often the best time to buy high-quality businesses at significant discounts. Timing the bottom is impossible, but identifying great companies on sale is entirely within reach.
Turning Volatility into Your Advantage
As an adviser, I see these periods as opportunities to:
- Reassess portfolios and ensure they align with long-term goals.
- Identify undervalued, high-quality businesses that can deliver strong returns over time.
- Stay calm, avoid panic selling, and focus on the bigger picture.
The media may fuel fear, but as investors, we have a choice: get caught up in the noise or seize the opportunity to build wealth when prices drop.
The information provided in this article is general in nature only and does not constitute personal financial advice.
