Has your risk perception changed as a result of current market volatility?

Political neutrality disclaimer: This article is intended for educational and informational purposes only. It does not constitute financial advice or support for any political party, figure, or policy. References to current events are included solely to illustrate how external factors influence investor behaviour and perception. We remain impartial and focused on long-term financial wellbeing.

A familiar road trip

Historically, deep economic shocks and global uncertainty have prompted shifts in how investors perceive risk. Today, it's not a pandemic shaking markets—but an unpredictable cocktail of election-driven uncertainty, escalating trade tensions, and volatile geopolitics. So the question remains:

Should your long-term investment approach change in response to short-term noise?

Let's explore.

Imagine you're on a road trip. You enjoy the drive, taking scenic routes over highways, where the twists and turns add to the experience. Then suddenly, a truck swerves into your lane. You narrowly avoid a collision. Your heart races. For the next few kilometres, you grip the wheel tightly—extra cautious. Your risk perception has skyrocketed—but your fundamental approach to travel hasn't changed.

Over time, your confidence returns. The incident may shape your awareness, but it doesn't define your destination.

This is not unlike how we, as investors, respond to sharp market drops or fear-laced headlines. Our perception of risk spikes—but our actual tolerance for risk (our ability to stay invested through turbulence) often remains the same.

What is risk — really?

Carl Richards put it well: "Risk is what's left over when you think you've thought of everything."

In financial terms, we often equate risk with potential loss. But at Silke, we define it more clearly: the probability of permanently losing capital.

So, ask yourself:

• How did you feel when the markets pulled back after a Trump poll surge or a Chinese export shock?
• Did you move to cash? Increase exposure? Do nothing?

These emotional reactions offer insight into your perception of risk — but they don't necessarily reflect your tolerance for it. The two are different.

Risk tolerance vs. risk perception

Risk tolerance is fairly stable—almost like being introverted or extroverted. It's part of your personality. But risk perception? That's more like mood: fluid, easily swayed by headlines and market swings.

Over the past few months, we've seen rising volatility across global markets:

• Concerns around a potential Trump administration's impact on trade and tariffs
• Slowing global growth amidst sticky inflation
• Ongoing geopolitical friction between the US, China, and the Middle East

As a result, we've observed local and international investors increasing exposure to cash or fixed income — even while long-term fundamentals remain intact.

This behaviour mirrors what we saw during the COVID market panic and the Global Financial Crisis. The catalyst is different, but the human response is the same.

Acting on fear? Or acting on purpose?

In early 2020, many investors sold out near the bottom of the COVID crash—only to miss the recovery. Similarly today, acting on short-term fear (instead of sticking to your plan) could prove costly.

Let's remember: perceived risk is not actual risk.

Whether the volatility is caused by virus lockdowns, election promises, or tariff threats, markets have a long history of absorbing shocks and marching forward.

Three strategies to stay on course:

1. Stay informed, not reactive
   Being the driver of your investment journey means understanding the terrain—yes, there will be potholes, but don't abandon the trip.
2. Frame risk in time, not headlines
   The longer you remain invested, the lower your chances of permanent loss. Short-term discomfort often gives way to long-term reward.
3. Remember your 'why'
   Has your goal changed? Has your time horizon shortened? If not, the best action may be no action. Sometimes, the bravest move is to do nothing at all.

In closing...

Volatility isn't new. Whether it's pandemics, politics, or policy—it all affects short-term perception. But your investment philosophy, grounded in long-term outcomes, is what builds lasting wealth.

If today's noise is unsettling, reach out. We're here to walk the journey with you.

I look forward to talking with you again soon.

Shane Thom, CFP^® GTP(SA)™
Managing Partner // Key Individual // Integrated Wealthcare Advisor // Personal Portfolio Manager (PPM)

🏆🏆🏆🏆