As the chart below shows, S&P/ASX 200 Index (ASX: XJO) shares have seen significant volatility since the start of 2025. The index is down 5% from 14 February 2025, and some investors may be worrying about what's going to happen next.

We can't know how the next few months or years are going to play out. However, it's clear we should expect more uncertainty.

Tariffs and trade wars are unlikely to boost the global economy, and wars and elevated inflation are not ideal. The question is, how are we supposed to invest at times like this?

I have a few thoughts on the situation and how I'd play the volatility.

Defensive ASX 200 shares

If volatility is unnerving, it could be reassuring to invest in businesses with very stable earnings and dividends.

If the profit/dividend is unlikely to be affected, then the market (and ourselves) may be able to think more calmly about the business.

I'd consider ASX 200 shares like Telstra Group Ltd (ASX: TLS), Australian energy infrastructure business APA Group (ASX: APA), and diversified investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

There has been uncertainty before

It's not comfortable living through volatile times like this – that's why some investors are selling.

But I'll point out that the world regularly experiences difficulties. For example, in the last few years, ASX 200 shares have been affected by wars breaking out, the strongest inflation in decades, and a global pandemic. The GFC was another difficult period, and the Australian and global economies survived that, too.

We can't know what the next bump in the road is, but I believe we'll be able to recover again and then progress further.

Diversification

It's times like this that highlight the importance and effectiveness of diversification.

Some companies and industries are more vulnerable to profit hits from changes relating to tariffs (or other problems). In my view, a diversified portfolio, which is exposed to different risks and generates profits from different markets, is a useful strategy.

Exchange-traded funds (ETFs) can be very effective tools to quickly boost diversification. That's why I like options like VanEck MSCI International Quality ETF (ASX: QUAL) and Vanguard MSCI Index International Shares ETF (ASX: VGS).

Think long-term about ASX 200 shares

While there may be uncertainty and volatility this year and beyond, it's important to remember that our returns in 2025 won't decide how our shares will perform in 2030.

Businesses, and the share market overall, have grown to the level they have over the past 125 years through all of the wars, recessions, pandemics, and so on.

Good ASX 200 shares will be able to grow profit in the long term and improve their underlying value by 2030. If we invest with the long term in mind and pick good investments, I believe this period of heightened volatility and lower prices will seem like a useful time to invest when we look back at it in the future.