After April’s sharp decline and May’s quick rebound, it’s worth repeating: reacting emotionally to short-term headlines can hamper long-term success. In challenging markets, discipline is key. Core to our role as advisors is remaining objective and unemotional, building portfolios on research and fundamentals with the understanding that market or economic setbacks are a normal part of investing.

The dilemma, of course, is that human nature often compels us to want to take immediate action when faced with adversity. This instinctive response—rooted in our evolutionary drive for survival— can lead to decisions that hinder longer-term investing success.

While exiting the markets during tough times may feel right, the opportunity cost—when markets reverse their course, often unexpectedly—can significantly impact future wealth. Avoiding the worst days is ideal but nearly impossible to predict. Many of the strongest market days also tend to follow the weakest. Missing just a handful of the best days can reduce long-term returns. Ironically, sometimes the best “action” is to do nothing.

This dynamic isn’t limited to the longer term. During the 2020 pandemic, when the U.S. stock market fell 34 percent in just 22 days, an investor who moved
entirely to cash at the bottom in March and remained on the sidelines until July would have seen a 2 percent decline (from 2018 to 2022). In contrast, a disciplined investor holding the same balanced portfolio throughout that period would have seen a 21 percent gain.

A well-constructed wealth plan serves as a critical roadmap, but professional guidance can help navigate uncertainty and stay on course. One study suggests behavioural coaching alone may provide an average annualized return of 3.4 percent.¹ Don’t underestimate the role of discipline and support in making informed decisions, managing risk and maintaining focus on longer-term wealth goals.

^{1. https://russellinvestments.com/-/media/files/au/support/voa/voa_report_2023.pdf; 2. https:// investor.vanguard.com/investor-resources-education/article/four-timeless-principles-for-investing-success}

‍