What is volatility? The basics

Whatever you do, don't panic – you don’t want to make decisions in the moment that might impact your future financial health. Instead, what you can - and should - do is to be prepared.

Here are a few practical steps you can take that will help you through any periods of volatility.

1. Review your investment strategy. Has it changed? Or has the world around you? If your strategy is still in line with your goals and objectives, think about sticking with it and riding out the uncertainty.
2. Avoid making rash decisions. Acting in the moment and selling automatically when the markets fall could lock in any losses – as you’re selling at a lower price that you can’t recoup - and impact any potential future gains.
3. Take the right risks. If increased volatility makes you unduly stressed and you feel that you need to take action, make sure you're still happy with the level of risk you're taking and that it’s in keeping with your overall goals.
4. Check if your portfolio's well balanced. It’s well-worn idea, but having a mix of investments (diversifying your portfolio) can help minimise risk during periods of volatility, as no single asset class performs well all the time and in all economic conditions.
5. Keep some cash set aside. This is true whatever the investing climate, but make sure you have an emergency fund which will last you six to 12 months. This way you won't be forced to sell your investments to cover your day-to-day expenses and it gives them a chance to recover.
6. Set your sights on the long term. Another firm pillar of investing principles. Market falls can offer opportunities, as prices are lower. As the price falls, regular investors can buy low in the hope of future rises. Markets can - and have - recovered over time (although there are no guarantees). In this case, volatility can be your friend. But you need to play the long game.
7. Stop looking at your account. We fear losses more than we like gains. You'll thank yourself later by not checking in constantly on the value of your investments. And it will make you resist the urge to tinker unnecessarily with your portfolio.

So, when volatility happens, try not to catastrophise. It’s part and parcel of investing and can lead to opportunity if you keep your nerve and have the right preparations in place.

Next steps

If you’re worried about your investments

• Think about taking financial advice
• Find a diversified fund
• Make smarter investing decisions with our 5 principles for good investing

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.