Investment Principle: Staying Invested Matters

by | Jun 21, 2022 | Financial Planning, Investments

Key Investment Principle: Staying Invested Matters

Market timing is a dangerous habit for your wealth. When you stop staying invested and bail to cash, stop saving, or bail to bonds, you can interrupt the magic of compounding and that can leave you worse off in the long-term.

Staying invested is a key investment principle that underlines everyone’s financial plan. Why’s that? Well, your investment plan has an investment objective. That objective is in part based on your risk tolerance, but it’s also based on what you want your wealth to do for you. Over the long-term, earning a satisfactory average rate of return allows you to reach your financial goals.

A successful financial plan also requires the patience to stay invested when the market gets rough, and not get sucked into the latest fear (or greed) cycle. Today, we are in a fear cycle.

Right now, volatility is up and the market is down. Both stocks and bonds are delivering negative returns. When the market is in a drawdown, there is risk of increased loss due to fear. Let’s take a look at how the last two years have played out, and how that period illustrates why staying invested matters.

The best and worst days happen together

The good comes with the bad in the market. When volatility is high the worst days can be followed by the best days, and the best days followed by the worst days. As an investor, both help make up your long-term returns. Staying invested in your investment plan means accepting the good and the bad.

S&P 500 Daily Price Moves

As noted in the graphic above, volatility begets volatility. The best and worst days tend to occur in the same time period.   That’s why we recommend staying invested.

Research has shown that sticking to your investment plan is the way to go. Though tempting, market timing results are disastrous. Sure, it can feel great to miss the worst days, and if you only missed the worst days, you would do incredibly well! On the other hand, missing only a few of the best days can absolutely destroy returns too.

When you earn both the best and the worst, you earn the well published long-term rates of return the market produces and grow your wealth.

Don't Time the Market

Proof that staying invested works

Remember the market panic in 2020 when COVID-19 first became a pandemic? There was a very good argument that this time was different. But, staying invested worked then too. Since the beginning of 2020, a balanced portfolio is still doing well even with the current drop. Those that bailed to bonds or bailed to cash are not. The problem is you have to know when to get out and when to get back in, that means being right twice.

Bailing Out Hurts Returns

Jumping out after a big down day and not getting back in is what hurts. And what we find is that once you get out, you expect another whammy around every corner, never getting fully reinvested until much (much) later. Remember: you’ve probably missed the rebound if it seems like the storm clouds are receding.

The time to make a major change to portfolio composition is almost never during bumpy market periods like we have today.

Focus on the long-term

There is always a reason to sell. The problem is we judge based on the past, but life is lived forwards. Just because it feels bad now, or the news is screaming something terrible at you, doesn’t mean it won’t be a little less bad tomorrow.  The market rebounds not when things are perfect again, but when things get a little less bad.  In other words, stock prices bounce when improvements happen, not when things are perfect.

Since 1929, US stocks have suffered a Great Depression, a World War, extreme inflation, the Tech Bubble, a Financial Crisis, and a Global Pandemic! In spite of the negativity, human ingenuity keeps on working and the market has posted an average rate of return of 10% per year. According to the Rule of 72, and staying invested, means your investments double every 7.2 years on average. That’s amazing.

Long-term isn’t 3-months, it’s not even 3 years, it is more like 20 years. Staying invested over the long-term is how to earn solid investment returns and reach your goals.

Staying Invested Matters

Bad market action plan

This might sound crazy; however, bear markets are when all the good stuff happens. It allows investors to buy low. Bear markets also allow investors to set themselves up for future success.

Volatility is opportunity, just spelled differently.

We are working on overdrive to improve investment plans for clients for the long-term.  Here’s what we’re doing today:

  1. Averaging into the drawdown with new cash,
  2. Rebalancing portfolios to sell high and buy low,
  3. Reviewing Roth Conversion plans,
  4. Tax loss harvesting to eliminate mutual fund tax drag,
  5. Ensuring there is enough cash for withdrawal needs over the next 12-18 months.

Investing is risky. We know that. It’s why we try to match financial plans to your goals, and create an investment portfolio to match. When in doubt, stick to time-tested investment principles, and stay invested.

We’re staying invested too

The nature of financial advice puts us in the risk business. That isn’t stopping us from investing for client success. Earlier this year we engaged a branding firm to revamp our narrative and website. Check it out! Then, on June 1, we welcomed Alyssia Mazzanti to the team.

Alyssia Mazzanti

 She is a recent graduate of Robert Morris University with dual majors in accounting and financial planning. Her past internship experiences preparing taxes and reviewing investment plans gives us great confidence she’ll help us help clients. We are really excited to have her at the firm and delivering value!


Additionally, keep an eye out in the mail for your custom second quarter report. It will help confirm investment objectives, show how you’re currently invested, and set risk and return expectations. Of course, we don’t know the future, and just because something happened in the past is no guarantee it will happen in the future, building a portfolio around your goals is where the rubber meets the road. Either way, proactively reviewing investments is how to prevent being surprised by the market.

Adam K. Wright, CFA, CFP®         


We acknowledge that we pursue knowledge.

Schedule time to see if it would help your portfolio!

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