Portfolio Management | June 11, 2021

Don’t Let Market Volatility Throw You Off Course

A churning market can become a breeding ground for bad decisions if investors let their emotions get the better of them. The COVID crash in early 2020—when the market fell by more than 30% in a matter of weeks—is one such example. A big drop like that often elicits panic selling, but fleeing the market when times get tough could make it harder to reach your goals.

The Schwab Center for Financial Research found that an investor who started 2020 with a $100,000 portfolio and missed the 10 best days of stock market performance would have ended the year with $51,000 less than if she’d stayed invested the entire time—despite the 30% drop.1 Indeed, five of the best days occurred alongside five of the worst—meaning those who sold to avoid further losses missed out on a meaningful recovery.

Figures like these are a good reminder that sticking to your plan, even when things look grim, is often the best course of action. Crises pass and turbulent markets eventually stabilize—and those who remain steadfastly invested are often the better for it.

 

Charles R. Schwab

Founder & Chairman

1Schwab Center for Financial Research with data from Morningstar. The year began on the first trading day in January and ended on the last trading day of December, and daily total returns were used. Returns assume reinvestment of dividends. Fees and expenses would lower returns. When out of the market, cash was not invested. Market returns are represented by the S&P 500 Index®, an index of widely traded stocks. Top days are defined as the best-performing days of the S&P 500 during 2020. Past performance is no guarantee of future results.

What You Can Do Next