Adviser-to-client template: What the last few months have taught us about staying invested through volatility

For financial advisers to use with clients.

This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients.

Dear Client, 

By now, it isn’t news to anyone that the first half of 2025 has been marked by volatility, pessimistic headlines, and a sense of uncertainty – all a breeding ground for investor panic. But despite a sharp decline in markets, we’ve seen them rebound over the past 6-8 weeks—a real testament to the importance of staying invested, rather than reacting emotionally to market volatility.   

An investing framework doesn’t have to reinvent the wheel

“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions, and the ability to keep emotions from corroding that framework.” Warren Buffet 

Warren Buffett is known as one of the world’s greatest investors – if not the greatest – for a reason. The importance of a strong investing framework is always relevant, but particularly in times of volatility like what we’ve been seeing in global markets lately.

This is particularly notable when we talk about the importance of behavioural finance in decision-making. Standard economic models infer that all investors make rational decisions, sometimes referred to as Homo economicus. But, even anecdotally, we know that doesn’t always hold true. Behavioural finance, on the other hand, asserts that we all have biases that influence our decision making and therefore Homo economicus cannot exist. Making rash, emotional decisions when markets wobble can have significant impacts on an investor’s long-term outcomes, as shown by the graph below.

During periods of market correction or turbulence, we remind you to trust the framework that our investment manager, Morningstar, has developed over decades of experience: one that focuses on the long-term, looks at portfolios holistically, and focuses on an investment’s intrinsic value, and not the whims of the market.

Markets change quickly – and you don’t want to miss out

As we’ve seen in the above graph, investors who stayed invested not only withstood the volatility, but ultimately continued on an upward trend for returns – even accounting for market drops. And in the charts below, we can see the turnaround between April and May of this year alone. If you cast your mind back to ‘Liberation Day’, you may recall doom-and-gloom headlines. Just a month later, the green far outstrips the red on the charts: continuing to demonstrate the importance of staying invested and adhering to your financial plans, despite the intense media noise that surrounded these events.

Source: Clearnomics, MSCI, Bloomberg, JP Morgan 

Source: Clearnomics, MSCI, Bloomberg, JP Morgan 

What do you need to do?

In short, nothing. A well-diversified, multi-asset portfolio that is anchored to investment fundamentals should help to smooth out some of the market volatility, and the team at Morningstar Investment Management have constructed your portfolio to do just that.

Of course, if you still wish to talk through how your portfolio is designed to weather turbulence, or have any other questions about your financial plan, I’m always happy to help. Please feel free to reach out at any time.

Until then – have a fantastic week ahead. 

Signoff 

Important Information

As noted previously, this document is intended to support your service proposition to clients and the commentary does not constitute investment, legal, tax or other advice and is supplied for information purposes only. Past performance is not a guide to future returns. The value of investments may go down as well as up and an investor may not get back the amount invested. The information, data, analyses, and opinions presented herein are provided as of the date written and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Morningstar makes no warranty, express or implied regarding such information. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use.

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