Should you invest when markets fall?

Market downturns don’t just test portfolios, they test people. “What I hear from clients is: ‘It’s gone down… it’s going to go down more… I might lose everything,’” Andy explains. “It’s that fear of where it ends.”

It’s not entirely irrational. Loss simply feels worse than gain. A portfolio rising by 10% might feel reassuring, even expected. But a fall of just 3%? That’s when people start to worry.

Behavioural economists call it “loss aversion” – but in reality, it’s just human nature. We react more strongly to setbacks than to progress. The problem is that when investing, that instinct often drives exactly the wrong decision at exactly the wrong time; selling when markets fall, and only returning when things feel more comfortable again.

“People think they’re stopping the loss,” he says. “But actually, the moment you sell, you’ve locked it in.” This idea that losses are temporary unless acted upon is one of the hardest for investors to accept. Particularly now, when access to information is constant.

“Years ago, people didn’t see their portfolio every day,” Andy adds. “Now you can log in, check an app, read the news, it’s everywhere. That overload just amplifies the panic.”

And interestingly, he’s noticed a pattern. “The clients who don’t check all the time? They’re usually the calmer ones. The ones looking daily are often the most anxious.”

If panic is the problem, patience is the solution, but that’s easier said than done.

One of the most powerful ways Andy explains this to clients is by pointing to history. Not abstract theory, but something recent and undeniable: COVID. “You can literally see it on a chart,” he says. “As the chart shows, markets fell sharply at the onset of COVID-19, before rebounding just as quickly in the months that followed. It’s a classic V-shaped recovery

It’s exactly the kind of pattern seen time and again in market data: short-term falls are a normal part of long-term investing. In fact, it’s not unusual for markets to drop by around 16% at some point during the year, even in years that finish in positive territory.*

In other words, volatility isn’t an anomaly. It’s the price of growth. “Every downturn I’ve seen,” Andy says, “has been followed by recovery. That’s the pattern.”

The real danger isn’t the fall, it’s missing the rebound. Over the long term, a surprisingly large share of returns is delivered in just a handful of days. Miss them, and the impact is stark. Data shows that missing just the 10 best days in the market can dramatically reduce overall returns, and the more you miss, the worse the outcome becomes.*

“Those recovery days? You can’t predict them,” Andy explains. “If you’re not invested when they happen, you’ve missed it.”

* Data sourced from a James Hambro & Partners report produced for Amber River Shipman Wealth.

It’s a common instinct: sit in cash, wait for stability, then invest. The problem? Stability is only obvious in hindsight.

“If anyone could time the market perfectly,” Andy says, “they’d be very rich. But even the best fund managers don’t get it right all the time.”

That’s why the old cliché still holds up: it’s not about timing the market, but time in the market. “Delaying means you might miss the recovery,” he adds. “And that can make a huge difference over the long term.”

This is where the psychology becomes particularly counterproductive. “Everyone knows the phrase ‘buy low, sell high’,” Andy says. “But in reality, people tend to do the opposite. They sell when things fall and buy when things feel safe again, when prices are already higher.”

For many investors, moving to cash feels like the sensible option during uncertainty. But that safety comes with its own risks, ones that are often less visible.

“The biggest one is inflation,” Andy says. “Your money might look like it’s staying the same, but in real terms, it’s losing value.”

Even with relatively strong savings rates, the long-term picture is less reassuring. “Cash rarely outpaces inflation over time,” he explains. “And historically, investments have outperformed cash in the majority of years.”

That aligns with broader data: equities have beaten cash in most long-term periods, making cash a poor strategy for growth-focused investing.

There’s also a second, less obvious cost. “If you’re sitting in cash, you’re not just avoiding losses, you’re also missing gains,” Andy says. “And those gains can come quickly.”

So what actually works when clients are on the brink of making a poor decision? Not jargon. Not generic reassurance.

Instead, Andy leans heavily on something more tangible: personal context. “One of the most powerful tools we use is cash flow planning,” he explains. “We can model different scenarios, even market crashes, and show clients they’re still on track.”

That shift, from abstract worry to concrete evidence, can be transformative. “Rather than saying ‘don’t worry’, we can show them: here’s your plan, here’s your future, and you’re still okay.”

He also brings the focus back to something many investors lose sight of in volatile moments: why they invested in the first place. “If someone is saving for retirement in 20 years, what happens this month doesn’t really matter,” he says. “But it feels like it does if you’re only looking at the short term.”

Ask Andy, and the answer is almost disappointingly simple. “Patience,” he says. “It’s not exciting, but it’s true.”

The investors who tend to do well over time aren’t the ones making constant adjustments. They’re the ones who:

• Stay focused on long-term goals
• Avoid reacting emotionally to short-term noise
• Trust the process, and their adviser
• And, perhaps most importantly, they don’t check their portfolio every day.

“If looking at it is making you anxious,” Andy says, “take a step back. Check it less often. Give yourself some space.”

Market volatility is uncomfortable, but it’s not unusual. The real challenge isn’t predicting what markets will do next. It’s managing how we respond when they move.

Because time and again, the pattern repeats: Markets fall. Investors panic. Some sell. Markets recover.

And those who stayed invested? They move forward. Those who didn’t? They often spend years trying to catch up.

Or as Andy puts it, quoting Warren Buffett: “The stock market is a mechanism for transferring wealth from the impatient to the patient.”

Not complicated. But far from easy.