Staying the Course: Long-Term Investing During Market Volatility

Article Overview

• Time in the market beats timing the market. The overwhelming majority of five-year and ten-year periods have been positive for stocks. The longer your horizon, the higher your probability of a good outcome. Patience is your edge.
• Every market crash has been temporary. From the Great Depression to 2008 to recent pullbacks, markets have always recovered and gone on to reach new highs. Don’t let short-term losses blind you to the market’s long-term resilience.
• Beware of panic selling. Selling during downturns locks in losses and risks missing the rebound. Even a handful of missed days can slash your returns. If you stay calm and avoid panic, history suggests you’ll be rewarded when the market rebounds.
• Leverage the power of compounding. Give your investments time to grow. Reinvesting dividends and staying invested through ups and downs lets compounding work miracles — turning hundreds into thousands, and thousands into millions, given enough years.
• Stick to a plan that fits you. Ensure your portfolio aligns with your risk tolerance and time horizon. A balanced, diversified strategy helps you weather volatility without derailing your goals. When your plan is sound, “staying the course” through market storms becomes much easier.

Long-Term Investing: History is on Your Side

Every stock market setback in modern history has eventually given way to recovery and growth. The longer you stay invested, the greater the likelihood of a positive outcome. In fact, since 1929, roughly 88% of all five-year periods and 94% of ten-year periods in the U.S. stock market have delivered positive returns.

Even one-year periods — essentially a coin flip in markets — have been positive about 73% of the time. Put another way, while any given day or month is a toss-up, the odds of success tilt heavily in your favor over multi-year stretches.

Over decades, those odds approach certainty — historically, 20-year holding periods for the S&P 500 have never ended with a loss.

These statistics translate to real wealth building. Despite periodic downturns, the U.S. stock market’s long-term trajectory is unmistakably upward. For instance, $100 invested in an S&P 500 index fund at the start of January 2000 would be worth over $300 by early 2025. And if we zoom out further, $100 invested way back in 1870 would have grown to an astonishing $3.1 million by 2025 thanks to the power of compounding.

The lesson is clear — given enough time, patient capital tends to multiply.

The Folly of Market Timing: Why Predictions Often Backfire

When volatility spikes, it’s tempting to try to time the market — to sell before things get worse and buy back in at the bottom. But timing the market is extraordinarily difficult, even for the pros. Markets often rebound sharply when least expected, and missing just a few of those big days can devastate your returns.

For example, an analysis of the S&P 500 over the past 30 years found that missing the 30 best trading days would slash an investor’s annual return from about 8% to roughly 1.8% — essentially erasing decades of gains.

Similarly, missing only the 10 best days since 1995 would have cut your total returns in half. Why? Because many of the market’s strongest rallies occur amid bear markets or right as a new bull market begins, when pessimism is high. The very days you might feel most scared to own stocks have often been the days when stocks stage their biggest jumps.

On the flip side, even terrible timing isn’t fatal if you stay invested. One study looked at two hypothetical investors over a 20-year period — one who somehow invested at the market low each year, and another with truly bad luck who invested at the market peak each year. Amazingly, the unlucky timer still achieved an annual return of about 10.8% over those 20 years, versus 12.6% for the perfect timer. By the end, the “worst-timed” investor nearly tripled their cumulative investment.

The difference in outcomes wasn’t night and day — because what mattered most was staying in the market, continuously investing through thick and thin. As value investor Benjamin Graham said, “In the short run, the market is a voting machine, but in the long run, it’s a weighing machine.”

Daily prices might swing on fears and headlines, but over time real value shines through. Trying to jump in and out to avoid downturns usually just means locking in losses and missing the recoveries that follow.

Every Storm Passes: Lessons from 150 Years of Market Crashes

Market history offers plenty of stark examples to test an investor’s resolve. Consider the so-called “Lost Decade” of the 2000s — the dot-com crash that began in 2000 and the global financial crisis of 2008 together pummeled stocks by 54% at one point. An investor who bought at the peak of the tech bubble (August 2000) wouldn’t fully recover their losses until May 2013, more than 12 years later.

Enduring such a prolonged slump was undeniably painful. Yet those who did stick it out were rewarded — after 2013, the market went on to notch all-time highs and deliver a tremendous rally throughout the 2010s. In hindsight, the early 2000s wipeout looks like a temporary valley on the ever-rising long-term curve of the stock market.

The same pattern has repeated throughout history. The Great Depression saw U.S. stocks plunge nearly 80% in the early 1930s — the most catastrophic decline on record. But even that “next to impossible” scenario eventually reversed — by the 1930s, the market had fully recovered and began climbing to new highs.

The key takeaway from 150 years of crashes is not that declines won’t happen — they will, and they’ll always feel awful in the moment — but that declines are temporary. In case after case, the market “weighing machine” eventually trumps the panic of the moment.

This doesn’t mean the ride is smooth or that the timing of a rebound can be predicted — only that perseverance has consistently paid off for investors who can ride out the storm.

Short Memories & Big Mistakes: Investor Psychology in Troubled Times

If the evidence overwhelmingly favors long-term investing, why do so many people struggle to stay the course? The answer lies in investor psychology. We’re only human, after all — wired to fear in a downturn and excitement in a boom. Recency bias leads us to give undue weight to recent market conditions and forget long-ago lessons.

After years of strong returns, it’s easy to become complacent or overconfident, assuming the good times will roll indefinitely. Many investors who came of age in the 2010s, for example, only saw the market march upward and thus took on more risk than they could stomach, convinced that “stocks only go up.”

That short financial memory set them up for shock when volatility returned. People often forget what happened even a few years ago — the Nasdaq took 13 years (2000-2013) to break even after the tech bust — and so they underestimate how long downturns can last and how sharp losses can be.

During a crisis, our fight-or-flight instincts kick in. Watching a portfolio shrink by 20-30% can tempt even seasoned investors to hit the eject button and make a costly mistake.

Staying calm in the face of gut-wrenching drops is admittedly easier said than done. One practical tip is to zoom out and tune out — avoid obsessively checking your portfolio during turbulent stretches. If you check your investments every single day, you’re liable to see losses almost half the time (markets are down roughly 47% of days) — a recipe for anxiety.

But if you only check once a year, history shows you’ll find gains roughly 3 out of 4 times. In other words, giving your investments room to breathe can dramatically improve your perceived batting average.

Legendary investor Peter Lynch quipped that “far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves.” Staying focused on the long term helps avoid those self-inflicted wounds.

Bottom Line

Volatile times can test even the steadiest investors, but the evidence from decades of market history is clear — those who stay the course and keep a long-term perspective are the ones who come out ahead. By remembering that downturns are temporary and the odds favor patience, you can invest with confidence even when the seas get rough.

In the grand story of the market, time is the hero that turns temporary setbacks into enduring success. So hold on tight to your long-term strategy — the weight of evidence suggests it will pay off in the end.