Is it still safe to invest your money right now?
- Market movements are a normal part of investing, especially during periods of uncertainty.
- History shows that markets have often recovered over time, though paths of recovery can vary.
- Trying to time the market can be difficult and may lead you to miss opportunities for growth.
- While cash might feel safer in the short term, investing typically provides a better opportunity to grow and compound over time.
- Diversification and long-term planning can help you navigate market volatility with more confidence.
During periods of market volatility, it’s natural to feel uneasy about your investments. When headlines focus on geopolitical tensions, economic uncertainty and market swings, you may start to reconsider staying invested. But it’s important to recognize that volatility is a natural part of investing and can even present opportunities for the long‑term. What matters most is how you respond to uncertainty.
Understanding how markets have behaved in the past, together with a long-term planning approach, can help you navigate periods of uncertainty with greater confidence. Here’s what you need to know.
Market volatility throughout history
Over the decades, markets have experienced periods of volatility during wars, recessions, financial crises and global health events. While no two drawdowns are the same, markets have often recovered over time, though the timing and pace can vary from months to years.
Although there are no guarantees about future outcomes, you can feel reassured knowing that market cycles have consistently seen both downturns and recoveries. The chart below outlines five of the biggest market drops since 1990 and the recoveries that followed.
How markets responded to major shocks in the past
Event |
What happened to markets |
What happened over time |
Persian Gulf War (1990–1991) |
After Iraq invaded Kuwait in August 1990, the S&P 500 fell about 16% from its July peak to its Oct. 11, 1990 low. |
Markets began to recover shortly after the initial shock, returning to July levels by Feb. 11, 1991. |
Dot-com crash (2000–2002) |
Driven by a reversal in technology valuations, the S&P 500 fell about 42% between March 10, 2000 and Oct. 4, 2002. |
The recovery was gradual, with the S&P reaching a new high in 2007. |
Global financial crisis (2007–2009) |
Triggered by a housing market collapse and a credit crisis, the S&P 500 declined approximately 57% between Oct. 9, 2007 and March 9, 2009. |
The market recovered and regained those losses by March 28, 2013. |
COVID-19 pandemic (2020) |
Driven by global lockdowns, the S&P 500 fell roughly 34% between Feb. 19 and March 23, 2020, marking the fastest descent into a bear market on record. |
The index reached new all-time highs by Aug. 18, 2020, completing one of the fastest recoveries from a major crash in history. |
2022 bear market (inflation and the |
Driven by soaring inflation and the start of the war in Ukraine, the S&P 500 fell about 25% from its Jan. 3, 2022 peak to its Oct. 12, 2022 low. |
After a volatile period, the index climbed back to a new all-time high on Jan. 19, 2024. |
Looking at how markets responded to past events can help put today’s volatility into perspective. While history shows that markets have often recovered from periods of temporary volatility, past performance doesn’t guarantee future results. Even so, recognizing this pattern may make it easier to stay focused on long-term goals rather than reacting to short-term movements.
Why trying to time the market rarely works
When markets decline, it can be tempting to sell off your investments and wait until things feel more stable before reinvesting. The challenge is that it’s extremely difficult to predict the right moment to exit and re-enter the market.
Markets often recover unexpectedly, and some of the strongest market days have historically occurred shortly after periods of significant decline. By moving to the sidelines, you might miss these rebounds, which can have a meaningful impact on your long-term results. For example, between 2002 and 2021, seven of the S&P 500’s best days landed within two weeks of its 10 worst days. If you sold, you may have avoided some short-term losses, but you may have also missed the significant gains that followed.
Rather than reacting to short-term noise, it’s important to focus on maintaining a long-term investing mindset. This approach emphasizes staying invested through market cycles, recognizing that near-term movements are unpredictable and long-term goals often benefit from consistency and patience.
The cost of sitting on the sidelines
Holding cash can feel safe during volatile periods, and for short-term needs or emergency savings, it plays an important role. However, money set aside for long-term goals may lose purchasing power over time if it remains uninvested and you could miss out on potential growth from compounding.
For example, $10,000 kept in a savings account earning a 2% interest rate annually over five years may maintain its nominal value, but after factoring in inflation and taxes, real purchasing power usually ends up below the original amount. By contrast, investing that same $10,000 at a hypothetical 6% annual return rate, with 2% inflation, could result in around $12,121 over the same period.
While keeping cash on hand can feel stable in the short-term, investing gives your money the opportunity to grow and compound over time.
How to navigate market volatility with confidence
One way investors manage uncertainty is through diversification, which means spreading investments across different asset classes, sectors and regions. While diversification doesn’t eliminate risk, it can help reduce the impact of volatility tied to any single area of the market.
Diversified solutions, such as Fidelity’s All-in-One ETFs, can play a role in this approach. Fidelity All-in-One ETFs combine a broad mix of assets from global markets into a single fund. These portfolios are automatically rebalanced over time, helping you maintain a consistent asset mix that aligns with your long-term goals.
Portfolio design and time horizon can be important considerations in investment outcomes. Long-term plans are generally constructed to help you stay positioned through market fluctuations, rather than avoid volatility entirely.
The bottom line
It’s important to remember that volatility is a normal part of investing. Reacting to short-term market movements may feel reassuring, but staying focused on your long-term goals often matters more. Rather than asking if it’s still safe to invest right now, it can be more useful to consider whether your investment plan still aligns with your goals, timeline and comfort with risk.
A financial advisor can help you review your portfolio, provide perspective during uncertain times and build a plan designed to weather market cycles with greater confidence.
