Despite the ongoing bull market, many investors are feeling rattled by the recent bout of volatility as the S&P 500 index (^GSPC 1.83%) dipped by more than 4% between early December and mid-January.
According to a January survey from the American Association of Individual Investors, more than 37% of U.S. investors are feeling pessimistic about the market's six-month future -- a figure that has steadily increased from around 31% in mid-December.
While short-term volatility is normal and no cause for panic, times like these can be unnerving. Nobody can say what the market will do throughout 2025, but there's one simple move you should absolutely be making no matter what: Keep investing.
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A counterintuitive strategy
When the market is volatile, it can be tempting to press pause on investing until stocks stabilize. However, that can sometimes do more harm than good. While it may seem counterintuitive, one of the best things you can do is continue investing regardless of what's happening in the market.
Timing the market effectively is next to impossible, so if you're waiting for the perfect moment to buy or sell, you'll likely end up waiting forever. But time in the market is far more valuable, and investing consistently can help you earn more over time -- even if you buy at a less-than-ideal moment.
For example, say that you had invested in an S&P 500 index fund in January 2022. Stocks were about to descend into a nearly year-long bear market, and we wouldn't see a new all-time high for roughly two years. By today, though, you'd have earned returns of nearly 25%, as of this writing.
On the other hand, say you decided to sit out of the market until well into the recovery phase. If you had waited until, say, June 2024 to buy, you'd only have earned returns of around 13% by today -- even though it might have seemed safer at the time to invest when prices were steadily increasing.
For a more severe example, say that you had invested in an S&P 500 index fund in January 2000. The market was just beginning to fall after the dot-com bubble burst, entering what would become one of the longest bear markets in history. Then, once stocks finally reached a new all-time high, the Great Recession began.
For those who invested in early 2000, it would have taken nearly 15 years to start seeing consistent all-time highs. But by today, you'd have earned returns of more than 300% -- quadrupling your money.
Again, though, say that you'd instead waited until January 2015 to begin investing. At that point, the S&P 500 was reaching new peaks and advancing steadily into a new bull market. However, by today, you'd only have earned returns of around 189%.
Forget short-term ups and downs
While it's often easier said than done, try to avoid getting caught up in daily and weekly market fluctuations. The market's long-term performance is far more important, and if you stay invested long enough, you're all but guaranteed to see positive total returns.
The key, though, is to invest in the right places. Long-term stocks can still experience volatility, but these companies have strong enough fundamentals to pull through tough economic times and earn positive returns over years or decades.
When you're investing in stocks from strong and healthy companies, it doesn't necessarily matter what the market does in the coming weeks or months. By continuing to invest and staying in the market for at least a few years -- or ideally decades -- you can ride out any stock market storms and generate life-changing wealth.
