Riding the Market Waves: Why Staying Invested Beats Trying to Time the Ups and Downs
Stock markets are hitting record highs, and market optimism appears to have no bounds. The S&P 500 recently reached a new all-time high, while the ASX 200 past 9,000 points in August for the first time ever. Headlines are celebrating these milestones, and investors are understandably excited.
Yet beneath the fanfare, the waters aren’t entirely smooth. Interest rate shifts, geopolitical tensions, productivity challenges, and persistent inflation could all trigger market corrections.
For many investors, the question looms:
Should I cash out now, or stick to my strategy?
Why Staying Invested Matters
History shows that trying to time the market rarely works in anyone’s favour. The Global Financial Crisis (GFC) of 2007–2009 and the COVID-19 crash in 2020 are prime examples. Investors who panicked and sold in falling markets locked in losses, while those who stayed invested – or even added to positions – recovered strongly over time.
Even missing just a few of the market’s best-performing days can significantly impact long-term returns. The example below highlights the possible outcomes of investing $10,000 in the Australian share market in October 2003. If an investor stayed fully invested the entire time, that investment would have grown to $67,747 today. But if that investor had missed just the 30 best trading days, the $10,000 would have grown to only $18,245 - a shortfall of $49,502.
This underscores an important lesson: a disciplined, long-term investment strategy consistently outperforms reactive, short-term decisions. Staying invested, even through volatility, is often the most reliable path to growth.
The chart illustrates how missing the 30 best days impacts a notional $10,000 investment in the ASX/S&P 200 Accumulation Index, using daily returns from 31 Oct 2003 to 01 Sep 2025 (Source: Datastream).
Special Considerations for Retirees
For investors in the drawdown phase or nearing retirement, the stakes are higher. One key challenge is sequencing risk – the risk that the order of market returns can significantly affect how long a portfolio lasts. If a portfolio experiences a market downturn early in retirement and withdrawals are needed to cover expenses, losses can be locked in, making it harder for the portfolio to recover.
A common way to manage this risk is to maintain sufficient liquidity to cover 12–24 months of planned expenses. This approach reduces the need to sell investments during market dips, allowing the portfolio to recover and continue growing. It provides stability and peace of mind, helping ensure income remains steady even in volatile markets.
The Role of Diversification in Navigating Uncertainty
Diversification is key to managing risk while capturing growth. Holding quality assets across different regions, sectors, and asset classes helps smooth market swings and reduces reliance on any one area.
The Hood Sweeney Securities Investment Committee ensures client portfolios are built with high-quality assets to navigate uncertain times. The mix of assets in a portfolio is tailored to each client’s risk tolerance, ensuring the right balance between growth potential and stability. Diversification also extends within asset classes, with investment managers selected to complement each other and reduce risk.
For example, in International Equities, we use a mix of managers with differing investment styles. Some focus on growth, others on value. By combining approaches, the portfolio can capture opportunities in different market conditions and provide more consistent returns over time.
Understanding the Risks of Market Timing
Attempting to sell before a downturn and buy back after a correction sounds appealing, but history shows it’s nearly impossible to execute consistently. Corrections are normal – pullbacks of 10% or more are historically common in strong bull markets.
Moreover, emotional investing can be costly. Selling in fear often locks in losses, while waiting too long to re-enter risks missing the recovery. Staying invested – supported by strategic liquidity planning and thoughtful diversification – remains the most reliable path to long-term wealth creation.
What to Remember
Markets will always fluctuate, and uncertainty is inevitable. History shows that staying invested, maintaining liquidity, and building a diversified portfolio is the proven way to protect and grow wealth over time.
Book a confidential consultation with a Hood Sweeney Securities* adviser today if you need support with your financial plan including how your portfolio is structured and any income objectives.
Author: Craig Scroop (Representative of Hood Sweeney Securities AFS Licence No. 220897) is a Senior Financial Planner | Strategy & Investments at Hood Sweeney Securities with over 15 years of industry experience.
*The information in this article contains general advice and is provided by Hood Sweeney Securities Pty Ltd AFSL No.220897. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. Please refer to our FSG (available at https://www.hoodsweeney.com.au/services/financial-planning/how-we-service-our-clients/financial-ser…) for contact information and information about remuneration and associations with product issuers. All examples are provided for illustrative purposes only.