Investing: Staying the course

The market will test your strategy. The question is whether you'll still be in it when it recovers.

Why it matters

The four previous articles in this series cover what to invest in, how to structure your portfolio, and what fees to avoid. This one covers the single hardest part: doing nothing when everything in you wants to act.

Most investment returns are not lost to bad markets. They are lost to good investors making bad decisions during bad markets. The research is unambiguous: the average investor significantly underperforms the funds they invest in, because they buy after markets rise and sell after markets fall — the precise opposite of what builds wealth.¹ The gap between what a fund returns and what its investors actually receive, caused entirely by poorly timed decisions, has been estimated at 1–2% per year over long periods.² Compounded over 30 years, that gap is the difference between a comfortable retirement and a constrained one.

The antidote is not better market intelligence. It is the discipline to stay invested through volatility — to understand what market downturns actually are, why they are inevitable, and why the correct response to almost all of them is to do nothing at all.

What market volatility actually is

A market downturn is not a sign that something has gone wrong. It is a normal, recurring feature of equity investing — the price you pay for higher long-term returns. Since 1950, the S&P 500 has experienced a decline of 10% or more roughly once every two years, a decline of 20% or more (a bear market) roughly once every six years, and a decline of 30% or more roughly once every decade.³ Every single one has been followed by a full recovery and, eventually, new highs.

This is not reassuring in the abstract — it is reassuring specifically because the pattern is so consistent. Markets fall. Markets recover. The investors who capture the full recovery are the ones who were still invested during the fall.

The danger of volatility is not the volatility itself. It is what it does to human psychology. Watching a portfolio fall 25% triggers the same neurological response as a physical threat — the instinct is to act, to stop the pain, to get out. That instinct, applied to long-term investing, is almost always wrong. It converts a temporary paper loss into a permanent real one, and it guarantees you will miss part of the recovery.

Why timing the market doesn't work

The appeal of market timing is obvious: if you could sell before the crash and buy back at the bottom, you would capture all the gains and none of the losses. The problem is that nobody — not professional fund managers with teams of analysts, not Nobel laureates in economics, not decades of proprietary data — has demonstrated the ability to do this reliably and repeatedly.⁴

The maths make it even more daunting. A JP Morgan analysis of the 20-year period ending 2022 found that missing just the 10 best trading days — out of more than 5,000 trading days — reduced annualised returns from 9.8% to 5.6%.⁵ Missing the 20 best days reduced them to 2%. The critical detail: the best days frequently occur within weeks of the worst days. An investor who sells during a crash to "wait for things to stabilise" will typically miss the sharpest part of the recovery.

The alternative — staying invested through everything — requires no skill, no prediction, and no special information. It requires only patience and a portfolio you are comfortable holding during a downturn. This is why the right allocation matters so much: an investor in an 80% stock portfolio during a 40% market crash who cannot stomach watching their portfolio fall by 32% is likely to sell. An investor in a 60% stock portfolio who loses 24% may be able to hold. The second investor's portfolio is worth more after 20 years, not because the allocation was more aggressive, but because they stayed invested.

How to stay the course

• Understand that a falling market is not a loss until you sell — paper losses are temporary. Realised losses are permanent. The number on your screen during a downturn is not what your portfolio is worth over a 20-year horizon — it is what it is worth to someone who needs the money today. You are not that person.
• Set your allocation when markets are calm, not when they are falling — the time to decide how much volatility you can handle is before you experience it, not during. If a 30% market decline would cause you to sell, you are holding too much in equities. Adjust your allocation before the next downturn, not during it.
• Do not check your portfolio during market downturns — this sounds trivial; it is not. Research shows that investors who check their portfolios more frequently make worse decisions, particularly during volatile periods.⁶ If you know a crash is happening, the most useful thing you can do with your investment account is close the browser tab.
• Automate contributions so they continue through downturns — a standing order that invests a fixed amount each month will automatically buy more shares when prices are lower. This is dollar- or pound-cost averaging working in your favour. The worst thing to do during a downturn is to pause contributions — you are stopping yourself from buying assets at a discount.
• Distinguish between signal and noise — a business on the news, a prediction from a commentator, a friend's hot tip — none of these are reasons to change a long-term investment strategy. The question to ask of any information you encounter is: does this change my view of the global economy over the next 20 years? The honest answer to that question, for almost any single news event, is no.
• Have a written investment policy — a one-page document stating your target allocation, your reasoning, and a commitment that you will not make changes during market downturns unless your personal circumstances change. Written during a calm period, it becomes an anchor during a turbulent one. Many investors find that simply articulating their strategy removes the urge to react to short-term noise.
• Remember that your reaction to the market is the main variable you control — you cannot control interest rates, geopolitics, corporate earnings, or the timing of recessions. You can control whether you sell in a panic, pause your contributions, or chase last year's best-performing asset class. Focusing your energy on the controllable variables — allocation, costs, contributions, behaviour — is the entire game.
• If you feel the urge to act, wait 72 hours — a self-imposed cooling-off period before making any portfolio change during a volatile market. Most of the time, the urge passes. If it doesn't, talk to a qualified financial adviser before acting — not to confirm what you want to do, but to genuinely pressure-test it.

The 100 Great Years perspective

Staying the course in investing is a form of discipline that compounds just like money does. Every time you resist the urge to sell at the bottom, every time you keep contributing through a downturn, every time you ignore the noise and trust the plan — you are adding to a streak that builds real wealth over decades. At 100 Great Years, we think about this kind of discipline as a health behaviour as much as a financial one. The person who keeps training through a difficult month, who doesn't abandon their sleep routine when work gets stressful, who holds their long-term habits through short-term disruption — that person is building the same muscle. Consistency under pressure, in health and in wealth, is where the real returns are made.

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This article is for educational purposes only and does not constitute financial advice. Past performance is not a reliable indicator of future results. Always consider your personal circumstances and consult a qualified financial adviser before making investment decisions.