Investing
Election years, rate decisions, scary headlines — there is always a reason markets feel risky right now. History’s answer is surprisingly consistent: volatility is normal, and leaving the market usually costs more than riding it out.
Volatility is the price of admission
Meaningful pullbacks happen in most years, even years that finish strongly positive. Double-digit intra-year declines are routine features of markets that still delivered solid long-run returns. The discomfort is real; the abnormality is not.
This matters most for pre-retirees, because the fear of a downturn near retirement tempts people into the most expensive mistake available: selling after a decline and waiting for things to “feel safe” again.
Why missing a few days is so costly
The market’s best days cluster tightly around its worst days — often within the same few weeks. An investor who exits during turmoil almost guarantees missing part of the rebound, and studies of past decades repeatedly show that skipping just a handful of the best days cuts long-run returns dramatically. You don’t have to predict the recovery; you just have to be present for it.
What to do instead of timing
First, hold enough safe money — a year or two of spending for retirees — so a downturn never forces you to sell stocks at the bottom. Second, match your allocation to your actual timeline, not to headlines. Third, automate good behavior: scheduled contributions and an annual rebalance quietly buy low and trim high without requiring courage in the moment.
Political calendars deserve a special note: markets have historically been choppier in the run-up to elections and stronger afterward, but the long-run trend has rewarded investors under every combination of parties in power. Portfolios built around predicted election outcomes have a poor track record.
Key takeaways
- Sizeable intra-year drops are normal even in good years.
- The best days cluster near the worst days — exiting risks missing both.
- A cash buffer, a right-sized allocation, and automatic rebalancing beat prediction.
Sources
Drawn from long-run market-history research of the kind published by Capital Group and other major asset managers on volatility, election cycles, and the cost of missing the market’s best days.