Riding Out Market Turbulence: Why Staying Invested Can Work Better Than Trying to Time the Market

After a market drop, some investors might move their money to wait it out. Find out why staying invested may be a better approach than stock market timing.

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Key Takeaways

  • Sticking to your financial plans during periods of market volatility can help you stay on track toward your goals
  • Stocks have historically rebounded relatively quickly, often in just a few days, according to research conducted by TD Ameritrade
  • A financial professional could help you keep market events in perspective

Focus on the long term. Tune out the noise. Don’t trade on emotions. Ever wonder why this is the mantra of many financial professionals after a significant drop in the stock market? It’s because they understand that staying invested, even as you’re watching your portfolio decline, can be a way to help you keep moving forward on your financial journey—not market timing. Here’s why.

The Uncertainty of Investing 

The only thing certain about investing is that stock prices will go up or down on any given day. No one knows for sure which way they’ll go, by how much, or for how long, which makes timing the market extremely difficult. If you get spooked by the headlines and move your money into more conservative investments, you might miss a stock market recovery.  

Snapback Recoveries

History has shown that after a downturn, stock prices tend to rebound relatively quickly. Of the 10 days when the Dow Jones Industrial Average (DJIA) dropped more than 5% (see table below), the market bounced back within six trading days in all but three instances, one being during the recession of 2008. This means individuals who stayed invested, instead of trying to time the market, were generally made whole within a matter of days. Of course, past performance doesn’t guarantee future results.

DateDJIA Percentage Decrease

Recovery Period (Trading Days)

October 15, 2008-7.87%3
December 1, 2008-7.70%5
October 9, 2008-7.33%2
October 27, 1997-7.18%6
September 17, 2001-7.13%36
September 29, 2008-6.98%387
October 13, 1989-6.91%34
August 31, 1998-6.37%6
October 22, 2008-5.69%4
April 14, 2000-5.66%5
Source: TD Ameritrade. “Trading days” excludes weekends and any holidays when the stock market was closed.
For illustrative purposes only. Past performance does not guarantee future results.

Managing Your Investment Jitters

Understanding how quickly stocks tend to rebound might help you keep future declines in perspective. To further fight the urge to time the market, you might consider:

  • Limiting your screen time. Just because you can monitor your portfolio minute-by-minute doesn’t mean you should. And if you’re not planning to use the money for at least a couple of years, there’s generally no reason to hover over your accounts online. Instead, consider setting up a schedule to review your investments a few times a year, perhaps at the end of each quarter or every six months. This may enable you to get a better sense of market and economic trends to help you make more informed decisions about your portfolio. 
  • Reviewing your goals and risk tolerance. If market fluctuations are worrying you, perhaps you’re too heavily weighted in a particular stock or sector. If this is the case, diversifying the stock portion of your portfolio could potentially go a long way in helping to calm your nerves. 
  • Using dollar-cost averaging. With this strategy, you automatically invest a set dollar amount at regular intervals, such as $200 a month, which can help spread out investment risk over time. Your investment dollars tend to buy more shares when the market is down and fewer when it’s up. In either case, you’re still making progress toward your goals. And if you’re participating in your employer’s 401(k) or 403(b) retirement plan, you’re likely already using dollar-cost averaging to help build your retirement savings.
  • Working with a financial professional. In addition to being a sounding board, a financial professional can help you understand the factors that may be driving the market and what it may mean for your portfolio in the short and long term. This combination of industry experience, support, and guidance could be just what you need to help weather any big market swings.
  • Choosing a managed portfolio solution. It’s another way to possibly help keep emotions from getting in the way of your long-term financial plans. Managed portfolios provide a disciplined approach to investing. Professional money managers monitor market and economic conditions and adjust your portfolio accordingly to help keep it in sync with your goals, time horizon, and risk tolerance.

It’s only natural to have some concerns during a market downturn; after all, you’re trying to plan for your future. But it’s also important not to overreact and take actions that could throw you off-course, such as trying to time the market. Remember, you created your financial plan to help you pursue goals like retirement or your children’s education, and bumps in the road are to be expected. When you start to feel the bumps, remind yourself to focus on the long term, tune out the noise, and don’t trade on emotions. 

The Risks of Not Staying Invested

Key Takeaways

  • Sticking to your financial plans during periods of market volatility can help you stay on track toward your goals
  • Stocks have historically rebounded relatively quickly, often in just a few days, according to research conducted by TD Ameritrade
  • A financial professional could help you keep market events in perspective

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