The Art of Inaction

Let’s be honest, when markets get jittery, headlines scream “PANIC!”

You’re likely hearing the sensationalist stories in the media about trillions being wiped off the stock market, financial disaster and general doom and gloom.

The focus is on one short snapshot of the market to create headlines and gain clicks.

But if you zoom out, history tells a very different story.

• The 10 best days in markets often happen right after the worst.
• Exiting the market means you lock in losses and likely miss the rebound.
• Trying to “time the bottom” is like catching a falling knife…in the dark.

A More Sensible Perspective

Let’s look at the performance of a ‘medium volatility/risk’ investment portfolio as an example of what’s actually going on.

We’ll call it Portfolio D and it’s the pink line on each of the three graphs below. The composition of Portfolio D is approximately 60% growth assets (e.g. equities) and 40% defensive assets (e.g. bonds).

The other lines on the graphs represent portfolios with higher or lower volatility ratings. Portfolios A & B contain more growth assets and Portfolios E, F & G contain more defensive assets.

The first graph shows the movements in the short term, from the beginning of the year to now, and is most likely the sensationalist story you’re seeing in the media right about now. Disaster and panic all around at the steep drop in the markets.

Year to Date Performance (01/01/25 – 04/04/25) – Portfolio D down 7%

But let’s take a breath and look at performance over the (slightly) longer time period of one year.

12 Month Performance (to Friday 4th April) – Portfolio D up 1%

We can see from this second graph that Portfolio D is up 1% over the last year. There has been quite a bit of volatility but, despite what the media will lead you to believe, investors are not worse off than they were last year. Not much better admittedly, but not worse.

Now let’s look at things over a longer timeline – five years.

Investors who held Portfolio D for the last five years have seen a 50% gain.

So, here’s the real insight, investing isn’t about reacting. It’s about holding the line when it’s hardest.

What sets successful investors apart?

• Perspective – they know that volatility isn’t risk. It’s noise.
• Planning – they’ve aligned their portfolio with long-term goals, not short-term sentiment.
• Patience – they understand that wealth compounds over decades, not days.

Discipline over drama

There are some interesting lessons to be learnt from historical ‘market crises’. We probably all heard about the market falls but rarely hear the recovery stories that follow.

The lesson here is that history rewards those who stay calm when others run.

What’s your strategy built for?

An investment plan that can’t withstand a temporary drop in the market is not a plan, it’s a gamble.

At Everlake, we design strategies with turbulence in mind:

• Multi-asset, globally diversified portfolios
• Tactical rebalancing when volatility creates opportunity
• Personalised risk management for different life stages
• Ongoing conversations

“In volatile times, the most valuable advice we give is often a reminder of what not to do” – Marc Westlake, Managing Director at Everlake.

Regular Investing

Those who are investing regularly, for example through monthly pension contributions, are actually in a really strong position. This strategy, known as euro cost averaging, means you’re buying in at all points of the market cycle, the highs, the lows, and everything in between over time.

You’re not trying to time the market; you’re neutralising its volatility. Over time, this approach can lower the average cost of your investments and turns short-term drops into long-term opportunities. You’re also building consistency and removing a great deal of the emotion of investing.

And if you want to gamble in times of volatility, that’s fine – but recognise it for what it is, a bet on what might happen in the short term. And that is very different to investing.