Impact of the Russia-Ukraine conflict on your investments

There’s fear and uncertainty in the market which means superannuation and non-superannuation investments have seen a sharp decline.

The conflict between Russia and Ukraine has been devastating for so many, and the humanitarian cost has been huge.

The war has also had a substantial impact on global investment markets, and in turn many Aussie investors’ superannuation and non-superannuation investments.

In the first week of the conflict, we saw sharp declines in the Australian and global share market, with Australia seeing a one day loss of 3 per cent, with markets around the world posting their biggest losses since the Covid market meltdown last year.

This plunge has caught many investors by surprise, driving fear and uncertainty. But what does it mean for you?

Geopolitical conflicts drive volatility

The good news, for investors at least, is that history to date has shown us that geopolitical conflicts like we’re seeing in Russia aren’t linked to long-term declines in either the global economy or global investment markets.

But historical data does show us that geopolitical conflicts are linked to an increase in short-term investment market ups and downs (volatility). As the numbers above show we’re seeing that play out around the world now, and it seems likely that until there is a resolution to the conflict investors are potentially in for a wild ride.

Uncertainty in geopolitics can lead to volatility in investments. Picture: Dave Hunt/AAP

What does this mean for investors?

The obvious one here is that most investors have seen a decline in the value of their investments, both in their superannuation fund as well as non-superannuation investments. This is driving the fear and uncertainty we’re seeing in markets, and in my view this seems likely to continue short-term. Long-term though, the outlook for investors is still positive.

Nobody has a crystal ball so we don’t know where markets will go from here. But what I do know is that during periods of market disruption, investors looking for a short-term payday are facing more risk than those investing for the long-term.

Picking whether investment markets will be higher than they are today in a week, a month, or even six months is almost impossible, but I’m confident when you look at the long-term the markets will continue to grow and deliver for investors.

Your superannuation has likely declined but should correct itself in the long-term.

The importance of your timeline

This suggests it’s more important today than it has been in the recent past to ensure when you invest that you’re not going to be forced to sell your investments at the wrong time. The key to this is having a clear investment timeline.

You’ll want to map out your income and any other money coming in, look at your money going out broken down to necessary expenses and wants, so you can understand what money you have available to invest with the confidence you can leave it invested until it’s a good time to cash out.

Take advantage of uncertainty

In periods like we’re seeing at the moment, there’s always a lot of noise and hype out there that drives uncertainty for investors. It’s natural to end up fearful you’ll make a mistake that will cost you a bunch of money, and that stops many people from investing.

Most people want to wait until the uncertainty has passed so they can confidently invest. The problem with this approach is, that when you wait for the uncertainty to pass, often markets have recovered and you’ve missed the opportunity to take advantage of the market’s uncertainty to maximise your investment results.

I feel like you should be looking to build confidence before investing, but it’s possible to do this even when there’s uncertainty in markets. The key here is making sure you choose good investments, put a solid investment plan in place, and that you’re ready to ride out any short term periods of uncertainty.

The wrap

The Russia conflict has already had a big impact on investors, and where we go from here is anyone’s guess. This uncertainty can and likely will drag on investment markets around the world, and it can be a handbrake for investors in making the progress they want. But it doesn’t have to be.

Recent market declines and ongoing fear and uncertainty means that investors today can get into the market at prices cheaper than we’ve seen in recent months, laying the platform for solid results on the other side of market uncertainty.

To put yourself in the strongest position possible, think long-term and put a plan in place that’s aligned with where you want your money to be headed.

Ben Nash is a finance expert commentator, podcaster, financial advisor and founder of Pivot Wealth, and Author of the Amazon Best Selling Book ‘Get Unstuck: Your guide to creating a life not limited by money’.

Ben has just launched a series of free online money education events to help you get on the front financial foot. You can check out all the details and book your place here.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.