Staying invested: The cost of cashing out during a market sell-off
stock market, hoping to maximize gains by buying at the bottom and selling at the top. However, attempting to time the market can cause individuals to miss out on significant rallies, which often leads to substantially lower overall returns. Instead, it is worth considering a strategic allocation to stocks to support long-term growth.
The case for staying invested
The bar chart below demonstrates how a long-term investment strategy can produce much higher returns. Consider three hypothetical individuals, each starting with USD 10,000 in the S&P 500 over a 20-year period.
Investor 1: Remained invested and finished with USD 70,619.
Investor 2: Missed the 10 best days, resulting in a balance of USD 25,866.
Investor 3: Missed the 20 best days, ending with a total of USD 11,177.
The risks of market timing
These figures highlight the dangers of trying to time market movements. Short-term investors who mistime their entries and exits risk missing the market’s best days, leaving significant potential gains on the table. By focusing on long-term objectives and utilizing a strategic allocation, investors are better positioned to capture growth over time.
A balanced approach can be both a driver and a buffer
No single long-term investment can simultaneously protect an investor from market volatility while providing the growth necessary to reach specific goals. Instead, portfolios typically rely on a mix of diversified assets. Individuals who balance stocks—which offer the potential for higher absolute returns—with bonds—which provide durability, income, and predictability—have historically experienced less dramatic portfolio swings. Balanced investors trade some of the upside potential of an all-equity portfolio for less severe drawdowns and smaller average losses during down years.
Balanced portfolio performance
(Fig. 2) 30 years ended December 31, 2025
Risk Considerations: Fixed income securities are subject to credit risk, liquidity risk, call risk, and interest rate risk. As interest rates rise, bond prices generally fall. Investments in high yield bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt. Investments in bank loans may at times become difficult to value and highly illiquid; they are subject to credit risk, such as nonpayment of principal or interest, and risks of bankruptcy and insolvency. Stock investing involves risks including possible loss of principal. Diversification cannot assure a profit or protect against loss in a declining market. Index performance is for illustrative purposes only and is not indicative of any specific investment. Its performance does not reflect the expenses associated with the active management of an actual portfolio. It is not possible to invest directly in an index.
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