Market volatility – the importance of staying invested
- 16 April 2025 (5 min read)
Trump’s tariffs have led to a spike in volatility, with big swings being seen across major stock markets as the situation continues to develop. Despite this, we believe investors should not panic. Here we explain why.
Volatility is normal
It’s important to bear in mind that volatility is not new. Stock markets regularly go through bouts of volatility, and historically we have seen a correction in a major global stock market almost every year.
A return to profitability
However, for long-term investors we don’t believe these should be a cause for concern. Some of the most notable stock market crashes in recent times include the bursting of the dotcom bubble in 2000, the global financial crisis in 2008 and the Covid pandemic in 2020. Although these were uncomfortable for investors at the time, big crashes appear like small blips when we look at global stock market returns over a long timeframe. On each occasion we see a return to profitability for those who weathered the storm and stayed invested.
Don’t lock in losses
It’s natural to be concerned when markets fall, as nobody wants to lose money. However, withdrawing money after a correction is a guaranteed way to lock in losses. Furthermore, it can mean missing out on any potential market rebound, as historically some of the best days for the stock markets have occurred during periods of extreme volatility. It is said that ‘time in the market is better than timing the market’, and as long-term investors we believe this is true.
Buying opportunities
Although volatility is often seen negatively, it’s important to note that it can also provide buying opportunities. During volatile times, panic selling can drive prices far below where they should be. This can potentially create opportunities for other investors to pick up assets at bargain prices.
It’s important to stay diversified
We also believe it’s especially important to remain diversified during periods of volatility. This is because different types of investments tend to behave differently. For example, when investors lose their risk appetite, equities tend to fall while less risky assets go up. Holding a mix of different assets can help to reduce volatility in a portfolio, giving investors a potentially smoother ride with fewer ups and downs.