Investing, much like a roller coaster, comes with its ups and downs. So far, the first quarter of 2025 has left many investors feeling queasy, prompting some to consider jumping ship in search of safer ground. But is that really the best move? Here are a few key points to keep in mind to help you stay calm and focused during this turbulent ride.
1. Keep Your Eye on the Future
Market fluctuations are a natural part of investing. History has shown that while markets experience declines, they tend to rise over the long term. Consider this: from 1979 to 2023, the U.S. stock market experienced an average annual decline of -14%. However, 37 out of those 45 years still ended with positive returns.* This reinforces the importance of maintaining a long-term perspective.
If you invested in the stock market, chances are you did so with long-term goals in mind. If your investment strategy was based on short-term gains, then perhaps the stock market wasn’t the best choice to begin with. But for those who invested with a long horizon, remembering your original objectives can help ease the anxiety that comes with market downturns.
2. Stay on the Ride
When the market drops, the news is filled with explanations—tariffs, geopolitical conflicts, earnings misses, and more. I like to call this "noise." To be a successful investor, you need to filter out the noise. Market volatility can tempt investors to exit in hopes of avoiding further losses, but history has shown that staying invested is often the wiser choice.
Think of a roller coaster or a plane ride: when turbulence hits, passengers are advised to remain seated and keep their seatbelts fastened. The same principle applies to investing. As the saying goes, "this too shall pass."
Attempting to time the market can do more harm than good. Consider this: if you had invested $1,000 in the S&P 500 in 1990 and left it untouched, it would have grown to $27,221 by the end of 2023.** However, if you had missed just the single best trading day in that period, your ending balance would be nearly $3,000 lower. Missing the five best days would have cost you more than $10,000 in gains. The lesson? Markets have historically trended upward over time, despite short-term disruptions. Staying invested can help you capture those long-term gains.
3. Know Your Risk Tolerance
At an amusement park, you choose rides based on your "thrill tolerance." Similarly, investors should align their portfolios with their risk tolerance. A well-diversified portfolio tailored to your personal comfort level can make investing a smoother experience.
This is where financial advisors play a key role. By understanding your investment objectives, time horizon, and risk tolerance, an advisor can help you create a portfolio that matches your ability to handle market fluctuations. Investing doesn’t have to be stressful—with a solid plan and the right guidance, you can ride out the rough patches with confidence.
Final Thoughts
Market ups and downs are inevitable, but how you respond to them makes all the difference. Keeping a long-term perspective, staying invested, and aligning your portfolio with your risk tolerance can help you navigate the financial roller coaster of 2025. So, buckle up, stay seated, and enjoy the ride—history suggests it’s worth it in the end.
*Source: Annual Stock Market Returns by Year – The Balance.
**Source: S&P 500 Returns since 1990 – U.S. Inflation Calculator.
The S&P 500 is an unmanaged index which cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results. The hypothetical example referenced is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.