How ignoring the market paid off

Nothing is more irritating than someone coming back from holiday with tales of warm weather, delicious food and sights seen while you've been flat out surviving everything life throws at you.  

But I'm going to do it anyway (sorry!) and explain how time away actually helped my returns.   

After two years of marriage - and some seriously tight budgeting - my wife and I finally set off on our dream honeymoon to Europe.

As it was our first overseas trip (and first holiday as adults), we planned an "elevated Contiki" tour, visiting France, Belgium, the Netherlands, Denmark, Germany and Italy in a little under a month.  

Busy tourists don't have time for - or really understand - foreign-language TV. And committing to a digital detox left us devoid of news, except for a few snippets here and there.

Even before we boarded the sixteen-and-a-half-hour flight from Perth to Paris, share markets had been choppy - entering a technical correction (defined by a drop of 10% but less than 20%) - mostly thanks to the geopolitical instability associated with President Donald Trump.  

Reassured by the fact that we'd seen this kind of tariff talk fizzle out during his last term, I decided not to check my portfolio until we were back on home soil.

Some of you may think this is the height of madness, but my core portfolio is made up of diversified ETFs aligned to my time horizon. So daily, weekly, or even yearly ups and downs matter less than where things land over three, five, or 10-plus years.

Blissfully ignorant and completely unaware, munching on smørrebrød in Copenhagen, I missed the news that the trade war escalated in early April, with the volatility index briefly touching numbers not seen since the COVID correction in 2020.

In normal circumstances, there would have been red across the board on my computer screen and fear-laden headlines alerting us that Australian and US markets were down 7% and 11.5% respectively for the month - testing my resolve, and potentially leading to a knee-jerk decision to sell or change my holdings to limit the perceived damage.  

Yet, returning home blurry-eyed and jetlagged a few weeks later, there was little sign of any trouble. The Aussie market ended April up 2.5% for the month, while the US finished a mere 1% in negative territory.

While the moral of the story might be to take a holiday (wishful thinking), more accurately, it would be to acknowledge that market volatility is inevitable - and that focusing on your long-term goals can help you avoid making decisions, such as crystallising losses or switching strategies, that could impact your returns well into the future.

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