It’s not easy being a long-term investor these days. Headlines scream, “Americans Fear Market Crash” and “Tariffs Tank Stocks,” and suddenly it feels like the sky is falling… again.
Yet here we are: the S&P 500 recently closed at an all-time high.
How is that possible?
Let’s rewind.
Earlier this year, the market reacted sharply to President Trump’s, “Liberation Day” tariff announcement. On April 3rd, the S&P 500 dropped 12%—its second-largest single-day point loss ever. The Nasdaq posted its largest loss in history. Understandably, people panicked. “This time is different,” some thought.
It wasn’t. It was just… normal.
Between 1990 and 2024, the S&P 500 returned an impressive average of 10.5% annually. But here’s the part people often forget: during that same time, the average intra-year drop was 14.1%. That’s not a sign of danger—it’s a feature of the ride.
In 2025, we saw the market drop 19% from its high. That felt dramatic in the moment, but since then, the market has rebounded and is now up 6% year-to-date. For many of our clients, that’s been a pleasant surprise.
It’s a powerful reminder: volatility isn’t the enemy—it’s part of the process.
The Cost of Bad Behavior
When markets get rocky, people tend to make emotional decisions—usually the wrong ones. They:
- Pause regular investing
- Lower retirement contributions
- Sell out of riskier positions
- Look for “safer” alternatives
These reactions are understandable, but they’re also costly.
Consider this: if you invested $1,000 in the S&P 500 in 1990 and simply stayed put, you’d have $17,558 today. But if you pulled out every time the market dropped 5%, waiting to reinvest until the next all-time high, you’d end up with just $3,299.
Same market. Very different outcomes.
Or think about missing just a few good days. If you stayed fully invested, your average annual return might be 8.2%. But if you missed just the 10 best days? Your return could plummet to -12.2%. That’s how costly timing mistakes can be.
Don’t Let the Headlines Hijack Your Strategy
This year has been full of geopolitical upheaval: tariffs, wars, elections, rising tensions in the Middle East. And with that, more client questions than we’ve ever fielded about politics and investing.
Back in April, the tariff news caused a sharp drop in the markets. But when the plan was paused, the market fully bounced back within 30 days. Many investors were still rattled three months later, not realizing the recovery had already happened.
Markets react to uncertainty. But they also recover—often faster than we expect. In fact, looking at major geopolitical events (from 9/11 to COVID), the S&P 500 has averaged a 14.2% return in the year following the crisis. The fear may dominate the headlines, but it doesn’t last forever.
So What Can You Do?
First, accept that emotion is part of investing. We’re wired to feel pain when we lose money.
Second, set yourself up for success by creating a Personal Investment Policy Statement (IPS). It should include:
1. Risk Tolerance
Are you more concerned about losses or excited about gains? How much decline would keep you up at night?
2. Asset Allocation Strategy
How much will you keep in cash, bonds, and stocks? Your stock/bond mix will drive most of your portfolio’s ups and downs. Make this decision based on your goals—not the headlines.
3. Time Horizon
Do you need this money soon? If you’ll need access within 2–3 years, stick with guaranteed or low-volatility options like fixed income.
When the market gets rough, pull out your IPS. It’s your game plan—built with intention and purpose. Let it guide you back to center when emotions threaten to take over.
Staying the course isn’t always comfortable—but it’s powerful. The data, the history, and your plan all point in the same direction: patience wins.
RiversEdge Advisors, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.