Selling During Market Downturns Can Hurt Your Portfolio—Here's Why
With recent market turbulence driven by renewed tariffs similar to those seen during the Trump administration, many investors may feel tempted to sell their investments. However, financial research strongly advises against selling during these challenging times, as doing so can significantly hurt your financial future
Why Selling Out Hurts Investors
When the market swings wildly, the instinct for many investors is to exit quickly to protect their investments. Yet, selling out during market downturns can mean missing out on the best recovery days that typically follow.
Jack Manley, a global market strategist at JPMorgan Asset Management, highlights this common mistake: “When there’s a bad sell-off, it's usually followed by a strong bounce back. If you sell during the downturn, you might miss these critical recovery days.
The High Cost of Missing Market Rebounds
Research by JPMorgan Asset Management reveals that the market’s best days usually occur very close to its worst days. Over the last two decades, seven of the market's ten best days happened within just two weeks of the ten worst days. For example, during the pandemic-related downturn in March 2020, the market’s second-worst day was immediately followed by its second-best day.
To illustrate the impact clearly, consider this example:
A $10,000 investment made in the S&P 500 on January 3, 2005, left untouched until December 31, 2024, would grow to approximately $71,750—a 10.4% annualized return.
However, if the investor missed just the 10 best days of market recovery within that period, the total would fall dramatically to about $32,871—a significantly lower return of 6.1%.
Missing the 60 best days results in an even more dramatic loss, leaving an investor with only $4,712, less than half of their original investment.
Clearly, the decision to exit during downturns can significantly limit your investment growth over time.
Adjusting Your Perspective Can Help
Behavioral finance experts note that investors often act impulsively in response to sharp declines. Market drops trigger emotional responses, pushing investors toward perceived safety. Yet history consistently shows that staying invested tends to be the smarter financial decision.
Historically, markets have faced many crises—from wars and natural disasters to financial collapses and pandemics. Despite these challenges, the market has consistently rebounded and reached new highs over time.
Jack Manley advises investors to maintain a broader historical perspective. "Focusing on the long-term recovery can make day-to-day volatility easier to handle," he says.
One Key Question to Guide Decisions
Barry Glassman, a Certified Financial Planner, provides valuable advice for those nervous about market downturns. He suggests investors ask themselves, “Two years from now, do I believe the market will be higher than it is today?” Typically, the answer is "yes," making staying invested the wiser choice.
Glassman adds that even if reducing risk feels necessary, investors shouldn't exit stocks entirely. “You don’t need to drop to 0% stocks,” he explains. “That’s not prudent for long-term investing.”
Staying the Course With Falcon Wealth Planning
At Falcon Wealth Planning, we emphasize the importance of long-term strategies and resilience during market volatility. Our team helps investors maintain perspective and make informed decisions, ultimately safeguarding and growing your wealth through challenging market conditions.
Contact us today for personalized advice on navigating market volatility effectively.