Investing in Volatile Markets

Why You Should Stay Invested When Markets are Volatile

If you read or watch the financial news, you’ll hear a familiar narrative on any given day: we’re living in uncertain times, and current events have companies and investors rattled. So far in 2025, it’s the Trump administration’s tariffs causing market volatility. Last year, it was the presidential election. Before that, it was the war in Ukraine, supply chain disruptions, and COVID-19. As an investor, you may get queasy watching your wealth fluctuate wildly based on the headlines of the day. You may be hesitant to continue funneling your hard-earned money into a volatile market. You may even feel compelled to get out while you can, sell off your investments and stash your cash in a shoebox.

Don’t make that mistake. Making investment decisions based on emotions and short-term predictions is not a viable strategy for long-term wealth. On the contrary, staying invested and making consistent contributions to a diverse portfolio over many years is still the best way to grow your nest egg and neutralize the shocks of a volatile market.

Let’s explore the reasons why.

Volatility is the Norm

To reiterate, the markets are always in motion, responding to a host of factors including current events, corporate earnings expectations, consumer sentiment, and various macro economic indicators. Volatility increases as investors become more uncertain and worried about where things are headed and how corporations might be impacted. When something particularly unusual happens (a war or a pandemic, for example) it can set off a chain reaction of trading activity and put every investor on edge.

The following chart shows the fluctuating level of stock market volatility over the last 15years. While there are a few extreme (and short-lived) spikes in volatility, there are also constant fluctuations of a lesser degree throughout the years. It illustrates the point that volatility is a fact of life for investors, and attempting to avoid it would mean not investing at all.

Staying Invested is Key

Because the market is always subject to some level of volatility, it makes little sense to withdraw your money every time a worrisome financial headline pops up in your news feed. Fear is the enemy of investors. By cashing out when things look bad, you may avoid further losses in the short term, but you also rob yourself of the rebound that comes next.

Take a look at the next chart. It shows how a$1,000 investment in The S&P 500 index (illustrative purposes only - it is not possible to invest directly in an index) would be impacted if you missed out on the market’s best days of performance over 25 years.

Here’s another chart that illustrates a similar idea. Let’s say you had $100,000 invested in an S&P 500 index before the global financial crisis of 2008 came along. If, following the initial market crash, you had converted your investment to cash for just one year (perhaps wanting to wait for things to get “back to normal” before reinvesting), you would have missed the 2009 recovery and have nearly $400,000 less in your account today.

Another Option: Dollar Cost Averaging

Not only is it wise to keep your original principal invested through market volatility – you should continue to buy in. By systematically contributing a prescribed amount(say, $500 per month) to your retirement account, college savings or other long-term investments, you’re automatically buying more shares when prices are low, and fewer shares when prices are high. Over time, this simple strategy known as “dollar cost averaging”  can be more successful than trying to time investment purchases based on market conditions.

Diversification Smooths the Ride

Even when you invest systematically every month, it’s still unwise to “put all your eggs in one basket.” Rather, savvy investors know that diversifying their investments across a variety of sectors helps to mitigate risk and yields more consistent returns over time.

The chart below shows total annual returns of various market sectors over the past 15 years, illustrating how performance varies dramatically from year to year. The takeaway is that“ chasing winners” doesn’t work (because one year’s top performing sector could be last place next year), and that owning a diverse portfolio of assets is the best way to smooth out the ups and downs of the market. Diversifying properly across a variety of sectors is an important way for investors to weather market volatility.

Invest in Experienced Guidance

When yourfuture is at stake, it’s understandable that fear and uncertainty can cause youto question every investment decision. It’s yet another reason it’s importantto work with an experienced financialadvisor. While there are never any guarantees, a trusted advisor can help youbuild a systematic, fact-based approach to investing that takes emotion out ofthe equation and puts the odds of success in your favor.

At Quotient Wealth Partners, we help clients develop long-terms financial plans that can weather waves of volatility. Our experienced teams of qualified financial advisors can help you develop a custom plan built around your unique needs and goals.  

If you’d like help navigating market uncertainty, please contact us here or call us at (888) 895-4797 to schedule a no-cost, no obligation consultation.