Why it can pay to stay invested

Markets can be unpredictable, and when you see your investments start to fall it’s only natural to want to protect your money and sell your investments. But here’s the surprising reality – some of the biggest market gains happen right after the worst days. 

That’s because markets often bounce back quickly, and no one can predict exactly when that will happen. If you pull your money out and miss just a few of those good days, you could miss out on a big chunk of potential growth.

Trying to time the market isn’t just difficult, it’s risky. Staying invested, even when things feel uncertain, can give you the best chance to benefit from the recovery when it comes.

In its recent study, global asset manager Schroders examined £1,000 invested in the FTSE 250 - an index of medium-sized companies listed on the London Stock Exchange - from 1986 to 2021.

During the same period, the study found that if you had stayed invested in the FTSE Mid 250 you would have £43,595. If you missed out on the index's 30 best days, the same investment might be worth £10,627. This figure is not adjusted for the effect of charges or inflation.

Markets can be prone to mood swings – one day they can be up, one day they can be down. 

That might seem alarming when thinking about your investments and their value, but here’s the good news (and reality) – despite the average drop in value, the global stock market has ended in positive gains in 29 of the past 40 years, according to recent research by global wealth management business JP Morgan.

To put it simply, just because your investments dip for a while doesn't necessarily mean they’re doing badly overall. These short-term drops can be usually temporary, and the market often recovers.

So instead of worrying about every bump in the road, it’s better to focus on the bigger picture.

With headlines flying and world events unfolding by the hour, it’s easy to get swept up in the drama of daily market news, such as new governments, global conflicts, the introduction of trade and company headlines. But it’s important to remember that investing isn’t about today’s news, it’s about your long-term goals.

Whether you're saving for retirement, planning to buy your dream home, or building a future for your children, staying invested helps you stay focused. The markets may wobble, but your goals should remain firm. One way to reach them? Stick to your plan and let the short-term noise fade into the background.

One way to handle the ups and downs of the market, besides staying invested, is through diversification. That just means not putting all your money in one place.

Instead of investing only in shares (or stocks), you might spread your money across different types of investments like bonds, property, or other assets as well. This way, if one part of the market isn’t doing well, the others may help balance things out.

This is where multi-asset funds come in. Here fund managers will do the hard work for you by mixing different types of investments into one fund. That could help smooth out the ride and give you a better chance of more stable returns over time.