Markets are up. Markets are down. Then they’re up again! Is the pace of this environment driving you nuts?
If so, it’s understandable. No matter how well positioned your portfolio may be to handle market swings, it’s easy to feel concerned about what’s next. It can also make you begin to wonder if adjusting your strategy to ‘fit’ today’s environment might be wise.
If you find yourself pondering a change, here are three things to keep in mind that may help you resist the urge to react and, ultimately, veer away from a sound investment strategy:
Time in the market is more important than timing the market.
This is not just a saying—it’s backed by decades of data. The Nasdaq 100, which includes many of the largest and most innovative companies in the world, delivered an annualized return of approximately +13% between December 31, 2007, and June 28, 2019. The S&P 500, an index representing around 80% of the US equity market, returned approximately +9% annually over that same period.
Such a strong return may seem surprising in an era that included the largest financial crisis in modern history, a collapse in housing and credit markets, and widespread fear of global economic collapse—events that understandably could have led many investors to exit the market. And though the Nasdaq 100 and S&P 500 indices are quite different, they tell a similar story: investors who remained invested during inevitable downturns were rewarded over time.
This pattern holds true even during historic downturns.
This snapshot of the S&P 500 Index over nearly seven decades reveals how frequently market declines occur—and how consistently they recover over time:
Decline periods are deemed to be over when the index recovered 50% of lost value.
† Measures market high to market low.
Sources: Capital Group, RIMES, Standard & Poor’s. As of 12/31/23.
The takeaway: market downturns happen frequently, but they don’t last forever. Even including downturns, the S&P 500’s average return over all rolling 10-year periods from 1939 to December 2023 was +10.91%. From the Great Depression to the 1987 crash, the dot-com bubble, and the 2008 financial crisis, long-term investors who maintained discipline and stayed invested saw positive results over the long run. Markets are resilient. And while volatility can be uncomfortable, it’s not unusual—it’s simply part of the journey.
Short-term reactions driven by emotion often do more harm than good.
Selling during a downturn typically locks in losses, while waiting for the ‘right moment’ to re-invest in the market often leads to missed opportunities. The best days in the market often come right after the worst—and missing just a few of those days can have a lasting impact on returns.
To understand how this can play out in the real world, the following chart illustrates the very different outcomes for three hypothetical investors who invested $10,000 in the S&P 500 on January 1, 2005, but who took different approaches through December 31, 2024:
Sources: T.Rowe Price, S&P.
Graph is shown for illustrative purposes only.
Past performance is not a guarantee or a reliable indicator of future results.
The differences in growth of each portfolio are dramatic. Investor 1 stayed invested and ended the period with $61,750—achieving an annualized return of +9.5%. Investor 2, despite missing just 10 of the best days of trading, ended the same period with $22,871 for an annualized return of +4.2%. And Investor 3, who missed just 20 of the best days of trading, ended the period with a balance of $9,724—a loss of (-0.14%) on the initial investment.
These numbers aren’t just theoretical. They reflect how real markets behave in real moments of volatility.
Consider what happened during the early months of the COVID-19 pandemic. Between February 19, 2020 and March 23, 2020, the S&P 500 dropped nearly (-34%)—one of the fastest declines on record. Just five months later, the index had fully recovered. And by the end of the year, it had gained over +16%. During that same period, the Nasdaq 100 dropped more than (-27%), yet finished the year with a gain of just over +47%.
Unfortunately, many investors panicked during the downturn, pulling nearly $500 billion from investment funds. Because the speed of the recovery was impossible to anticipate, many who sold locked in their losses—missing out on the massive rebound that followed. Depending on when—or if—they reinvested, they may have missed out on the equally dramatic market rebound: roughly +50% for the S&P 500 and +75% for the Nasdaq 100. Through it all, investors who simply stayed the course were well rewarded.
When markets decline, it’s natural to feel the urge to ’cut your losses.’ And when markets rebound, the impulse to jump back in and ’capture wins’ can be just as strong. (There is even a Fear and Greed Index that that tracks how these emotions influence market behavior.) But both reactions can work against long-term financial goals. For investors who are tempted to ’buy low’ and ‘sell high’, the lesson is clear: market timing is risky—and often means missing out on the best of what the market has to offer.
At Leisure Capital Management, we work with investors to build portfolios that are designed not just to weather volatility, but to grow through it. Grounded in thoughtful diversification, disciplined rebalancing, and a deep understanding of each client’s unique financial picture, that approach helps our clients maintain perspective and stay focused on the long term.
Warren Buffett put it best: “The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” When the market feels shaky, having a clear investment philosophy—and the discipline to stick with it—is critical. While no one can predict exactly what markets will do tomorrow, history reminds us of the trends that are repeated over time. In the end, success doesn’t come from reacting to every twist and turn. It comes from staying invested, staying patient, and trusting in the power of time.
