Where should you invest your money during sharemarket turmoil?

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In a world filled with difficult and dangerous jobs, one that regularly flies under the radar is the perilous task of personal finance writer. Sprained thumbs, bruised egos and deadline pressure headaches are just some of the travails we’re forced to contend with, all with minimal sympathy from the broader public.

But by far the greatest problem we face is being fully at the whim of global markets which are, in turn, at the whim of Prevaricator-in-Chief Donald Trump. On Wednesday, when I decided to write this article on where best to invest $10,000 when the markets were down, it seemed like a great idea.

Market volatility needn’t stop you from investing. Credit: Michael Howard

However, when I woke up on Thursday to write it, Wall St had just experienced one of its best days in history, surging 9.5 per cent after Trump backflipped on some of his tariff plans. By the time you read this, who knows what state the global economy might be in.

What’s the problem?

Regardless, it does seem like we’re in for a period of volatility and likely some more significant falls (and gains) in the weeks and months ahead as the US works out what the hell it’s doing. This can provide some good opportunities for anyone with money to invest, though the options can seem a bit overwhelming.

What you can do about it

So if you’re wondering when and what to spend your money on during these uncertain times, read on:

• Don’t try to catch a falling knife: Before you do anything, investing when markets are down or falling should not be viewed as an exercise of trying to pick the bottom. This seldom works out, so instead, break your investments up into bits and invest over a course of days or weeks, known as dollar-cost averaging. Sure, you might miss out on some gains here and there, but you’ll also avoid the risk of mistiming your investment badly.

• Superannuation: “Boo, boring, get some new material,” I hear you all yelling, but bad luck, super is and remains one of the best places to invest your money. If you’re close to retirement and don’t have the luxury of time to ride out the peaks and troughs of the stockmarket, consider a more conservative asset allocation within your super. Deline Jacovides, financial planner at Mazi Wealth, says given the proximity to the end of financial year “one of the smartest things” someone earning over $45,000 could do is make a personal concessional contribution to super. “Even after the 15 per cent contributions tax, you’re effectively saving between 17 per cent and 32 per cent in personal tax, meaning a $10,000 contribution could return an immediate tax benefit of $1,700 to $3,200,” she says. “That’s a hard return to beat in any market!” Super funds are also diversified investments which are inherently less risky during volatile periods, with most funds having significant allocations to more “defensive” assets like bonds and cash.

• Bonds: Speaking of bonds, another option Jacovides suggests for those who aren’t keen on their money being locked away until they turn 60 are investment bonds. These are similar to ETFs/super in that they’re an investment that consists of a bucket of other investments, and the earnings are taxed within the fund – not on your personal tax return. “Investment bonds work best for those who have a minimum 10-year time horizon because any funds withdrawn after 10 years have no personal capital gains taxes to pay,” she says. “This aligns nicely with people looking to invest in growth assets as we should also have a long timeframe in mind when it comes to investing.”

• A contrarian option: For those who are more confident in their investing ability and want to try something a little more left field, Scott Montefiore, wealth advisory partner at William Buck, says the contrarian option – where you intentionally invest against the prevailing view of markets – could be an option. “I am looking at some of the US Quantum and AI shares that have been heavily sold off and look attractive, in addition to some of the Asian share markets where you can use an index fund to gain access,” he says. “I like to invest in markets where others are fearful to do so ... although with the recent uncertainty, there is considerable risk associated with doing so.”

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.