Portfolio construction

Three reasons to stay invested in volatile times

April 23, 2024 - 5 min read

Selling your investments when markets appear to be in crisis mode may feel like the right thing to do. However, decades’ worth of market data show that staying invested through volatile times has been a smart route to take to pursue long-term financial goals. For Millennial investors who may not have experienced the sharp market declines of the Financial Crisis of 2008–2009, today’s extremes may be even more unsettling. But if you’re investing for goals 5, 10 or 30 years away, here are three reasons why you should avoid emotion-based investment decisions.

1. Markets have historically been resilient: Despite facing decade after decade of wars, virus outbreaks, natural disasters, recessions, and financial crisis, markets continued to climb higher over the past 30 years. Consider how these hypothetical $10,000 investments allocated to stocks and bonds grew over 30 years, ending 3/31/2023.

Cumulative growth of $10,000

For illustrative purposes only. Periods chosen are based on start of drawdown to maximum drawdown and recovery period. Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index. Past performance is no guarantee of, and not necessarily indicative of, future results. Source: Natixis Portfolio Research & Consulting Group (PRCG), FactSet

2. Cashing out has historically meant missing out: Investors who panic and sell often miss the upside if markets rebound. Consider what missing out on the 25 best days in the US stock market over the past three decades would have meant to the growth of a hypothetical $10,000 investment in the S&P 500^® index.

Cumulative growth of $10,000

25 Best Days for S&P 500 TR USD between 12/31/1987 and 12/31/2022. For illustrative purposes only. Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index. Past performance is no guarantee of, and not necessarily indicative of, future results. Source: Natixis Portfolio Research & Consulting Group (PRCG), Morningstar MPI.

Now look at the returns of the US stock market after the 25 worst quarters from 4/1/1936 to 12/31/2022. Investors who sold during these turbulent months would have missed out on market recoveries in the following months or years.

Displays the 25 Most Negative Performance Quarterly Returns for the S&P 500 TR USD since 4/1/1936. 1-Year, 3-Year, & 5-Year Returns are cumulative.
Source: Natixis Investment Managers Solutions. Morningstar, MPI. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

3. Time is on our side: As a long-term investor, it’s wise to remember that it’s not a “timing” issue, it’s just an issue of time. Consider how staying invested over the long term has historically added up. This hypothetical $100,000 investment in the S&P 500^® Index over 30 years, ending 12/31/2022, grew significantly – despite several volatile short-term market events.

$100,000 hypothetical investment in the S&P 500 Index over 30 years

The chart reflects the hypothetical investment of $100,000 in the S&P 500 for 30-year periods ending December 31, 2022. For illustrative purposes only. Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index. Data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Source: Natixis Portfolio Research & Consulting Group (PRCG), FactSet

S&P 500^® Index is a widely recognized measure of US stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the US equities market.

Bloomberg Barclays U.S. Aggregate Index is an unmanaged index that covers the US-dollar-denominated, investment-grade, fixed-rate, taxable bond market of SEC-registered securities. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed securities, asset-backed securities, and collateralized mortgage-backed securities sectors.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

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