The importance of 'time in the market' rather than 'timing the market'

As a long-term investor, one of the key challenges is being prepared psychologically for market volatility - and whilst market swings can be unsettling and even create the sense that 'this time it’s different', it's important to put short term market movements into a broader, longer-term context.

In the early months of 2020, the global coronavirus outbreak led to a sudden market meltdown - only to be followed by a surprisingly quick recovery by the summer. Not long after, in 2022, equity markets around the world entered bear market territory, before rallying again in 2023.

But it's perhaps not surprising that with the global equity markets' response in recent weeks to the trade tariffs announced by US President Trump, and with ongoing geo-political tensions in Ukraine acting as a catalyst for political uncertainty, many investors will once again have volatility on their minds.

The importance of 'Time in the Market' versus 'Timing the Market'

Whilst the broader economic implications of the US tariffs are still evolving - as central banks, trading blocs and individual governments respond in turn - market sentiment, which often prices in the worst-case scenario, will ultimately recalibrate. And although future market trends cannot be predicted, it’s important to remember that historically, markets have weathered similar tariff-related disruptions, from the US China trade conflict of 2018-2019 to earlier episodes of protectionism, with initial market shocks being followed by recoveries, as policy paths clarified and businesses adjusted. Indeed each market correction or bear market has historically been followed by a recovery.

If volatility causes you worry about achieving your long-term goals, it can be helpful to visualise the following analogy. Picture a person riding up an escalator while playing with a yo-yo. The yo-yo represents the volatility of a stock market index – on an hourly, daily, and weekly basis, it will always go up and down - but importantly, in the wider context, the long-term trend and direction of travel is consistently upwards.

‘Focus on the escalator rather than the yo-yo’

Also important, psychologically, is to tune out the media noise. When you hear messages of doom in today's 24/7 news media, you’d never know that volatility has historically always been been a recurring feature of the market cycle. And whilst news channels need stories and attention-grabbing headlines, you don’t need the anxiety.

For those invested in portfolios where the diversification and allocation of assets reflects their attitude to risk and their time horizon, this volatility represents a temporary dislocation, not a fundamental threat to their long-term financial goals.

The volatility you experience in your portfolio is likely to represent a milder version of what’s happening overall in the markets. Your portfolio’s asset allocation should dampen volatility, with the fixed-income component acting as a ballast to help smooth out returns, and diversification within each asset class (and geographically) also mitigating risk.

And whilst volatility and equity bear markets can make all the usual challenges of being a long-term investor that much more difficult, with extreme market swings potentially creating a sense that “this time it’s different”, it’s exactly at times like these that it’s important stay focused on your long-term objectives, and valuable to remind oneself that it’s ’time in the market’, rather than ‘timing the market’ that counts.

The value of staying invested

During periods of volatility it's important to resist the urge to react impulsively to headlines and short-term noise.

'Timing the market' by selling at the top and buying at the bottom sounds straightforward in principle, but in reality is virtually impossible. Ironically, the best performing days of the market often occur in close proximity to the worst, so trying to beat the market by taking short-term positions to avoid losses can often mean missing out on the days in which the market grew the most. Using the FTSE 100 again as an indicative index to illustrate this point, an investment of £100,000 made in January 2000 and left invested until January 2024 would have delivered a return of £263,152. Missing out on just the 10 best performing days during that 24 year period would result in a return of just £200,493, effectively costing the investor 63% on their overall return*.

Volatility, while challenging, can also represent a value driven investment opportunity

When markets have dipped in the short term, history also shows that these moments can create compelling buying opportunities. And it is exactly this approach that our asset management partner Morningstar, with its value driven investment philosophy, adopts - with a disciplined, long-term view, drawing on its asset-allocation and risk profiling research delivered by more than 250 analysts worldwide.

History shows that equities in quality companies with strong fundamentals and sustainable competitive advantages - typically referred to as ‘wide moat’ businesses - are often well placed to navigate volatility and emerge stronger - and therefore represent a compelling opportunity to ‘buy the dip’, at a material discount.

“We invest based on the fundamentals of a company - their ability to innovate,
generate cash flow, and maintain competitive advantages over time.

Tariff-induced volatility may present opportunities to initiate or reinforce
positions in companies with strong, sustainable growth trajectories.” Morningstar- 4 April 2025

Our core philosophy

Our core philosophy at Forth Capital is to provide each of our clients with an optimal investment solution; a bespoke goal-based financial plan tailored to their individual requirements, combined with access to a range of straightforward, transparent, award-winning investment strategies, designed in partnership with Morningstar [the world’s largest funds analytics company], to help them achieve those goals.

In 2016 we partnered with Morningstar to draw on their world-leading investment, asset-allocation, and risk profiling research, delivered by 270 analysts worldwide. The 'Next Generation Investment Strategies' provide exposure to a broad range of asset classes, delivering strategic diversification, aligned to each client's risk profile.

If you would like to discuss your portfolio in relation to the prevailing volatility, or any other aspect of your financial planning, please don't hesitate to contact us, or email our Client Services Team to schedule a meeting.

Together, we can look at your risk profile and your portfolio, analyse your current investment strategy to determine whether it’s right for you, and confirm whether you’re on track to meet your goals.

* Source: Columbia Threadneedle Investments FTSE 100 Total Return (TR) Index and the impact of missing the 10 best % days on £100,000 invested.


This communication is for information purposes only and does not constitute financial, legal, or tax advice. Please schedule a meeting to receive advice on international financial planning and wealth management.