When markets go up and down it can make us feel nervous about our money. Here’s what to know about market volatility, using the share market as an example.
Volatility is how the return on an asset fluctuates over time. Using the share market as an example, volatility is often measured by changes in the price of a share. When the market is volatile, prices can rise or fall a lot in a short time.
These movements mean the value of your investments can change quickly. They might rise in value one day and fall the next.
Volatility can make us feel nervous, but short-term ups and downs happen often in share markets. Over long periods, markets have moved through many cycles of rises and falls.
Check out this chart from the Australian Securities Exchange (ASX) showing an example of Australian share price movements between 1995 and 2025.
What causes share market volatility?
As the ASX chart linked in the smart tip box shows, a lot of factors can move share prices quickly.
Share markets respond to new information such as economic data, company results and global events. Investors react to this information by buying and selling shares, which moves prices.
Economic data often affects the market. Changes in interest rates, inflation or economic growth can shape how investors view the future performance of companies.
Global events also influence markets. Political decisions, trade changes or international conflicts can create uncertainty for investors.
Investor behaviour can also drive volatility. When many investors feel nervous, they may sell shares at the same time, which can push prices down. When investors feel more confident, they may buy more shares and push prices up.
Because new information appears all the time, the price of listed shares can change frequently.
What to consider when markets are volatile
Large changes in share markets market movements can make us feel nervous, but quick reactions to market swings can sometimes lead to poorer long term decisions. So:
- Focus on your goals. Markets move in the short term, but many people invest for the long term. Make sure you match your investments to your goals, timeframe and risk level, and review your investment plan regularly.
- Avoid emotional decisions. Selling investments during a fall can ‘lock in’ losses. And making emotional decisions might also make you a target for scams.
- Stay diversified. Spread your money across different investments such as shares, property, bonds and cash to help reduce risk.
- Seek advice if you need it. A financial adviser can help you understand your options.
A clear plan can help you stay focused when markets move up and down.
Be on red alert for phone calls, click bait advertising and promises of unrealistic returns to encourage you to put your super into risky investments. High-pressure sales tactics may be putting your super savings at risk. Stop, think carefully, and check the claims first.
Read the investor alert and our tips on how to protect your money.
How to learn more
Learning about investing can help you feel more confident during market volatility.
Explore our information on investing and planning.
If you feel unsure about your next step, you may want to speak with a licensed financial adviser. They can help you understand how market movements may affect your personal situation.