Should I sell my investments when markets are falling?

Selling during a market fall locks in a loss that might otherwise be temporary. History has consistently shown that markets recover over time, and that investors who stay the course through downturns tend to fare better than those who exit and then try to time re-entry. Any changes to a portfolio should follow a calm review of your strategy and circumstances, not a reaction to short-term headlines.

What does diversification actually mean for my portfolio?

Diversification means spreading investments across different asset classes (equities, bonds, property and cash), industries and geographies so that a fall in one area does not affect the whole portfolio disproportionately. In practice, a well-constructed portfolio will rarely deliver the highest possible return in any given year — but it significantly reduces the risk of a single event or sector causing serious, lasting damage to your overall position.

Why is rebalancing my portfolio important?

Market movements cause the composition of a portfolio to drift over time. A strong run in equities can leave you holding a higher proportion of stocks than your risk profile intends, meaning you are taking on more risk than you planned. Regular rebalancing brings the portfolio back to its intended structure, maintains alignment with your goals and risk tolerance, and imposes the discipline of selling some of what has grown and adding to what has lagged.

What is pound-cost averaging and why does it help investors?

Pound-cost averaging means investing a consistent amount at regular intervals regardless of market conditions, rather than trying to invest a lump sum at the best possible moment. When prices are lower you buy more units, and when prices are higher you buy fewer. Over time this smooths out the impact of volatility and removes the pressure of timing the market — which even professional fund managers find consistently difficult to do reliably.

How long should my money be invested to ride out market volatility?

Investments are generally most appropriate for money you will not need for at least five years, and often considerably longer. The longer your time horizon, the more opportunity you have to recover from temporary setbacks and benefit from the long-term trajectory that diversified portfolios have historically delivered. Short-term volatility matters much less when you are not relying on the money imminently. If you expect to need the funds within a few years, holding more in lower-risk or cash assets is usually more appropriate.

Navigating Market Uncertainty | Burlington Financial Solutions

Market volatility is an unavoidable part of investing. Geopolitical events, trade disputes, inflationary pressures and shifts in interest rates all contribute to market fluctuations, sometimes sharply. When markets fall quickly, the temptation to act can be powerful. History, however, consistently shows that investors who have a clear strategy and stick to it tend to fare better than those who make reactive decisions under pressure.

That is easier said than done. Recent months have reminded us of this. The scale and speed of market movements following the announcement of US trade tariffs in early 2025 caught many investors off guard. Those without a clear plan were left asking what to do. Those with one were in a much better position to do nothing, which was often the right answer.

Maintain discipline

The most costly investment mistakes tend to happen when emotion takes over from logic. Selling during a sharp decline locks in a loss that might otherwise have been temporary. History has repeatedly shown that markets recover, and that investors who stay the course through downturns often end up better placed than those who exited and tried to time re-entry.

This is not to say markets always recover quickly or that no action is ever appropriate. But any change to a portfolio should follow a considered review of your strategy, not a reaction to last week’s headlines.

Diversify across asset classes and regions

Diversification is one of the most reliable tools available to investors. By spreading investments across different asset classes (equities, bonds, property and cash), industries and geographies, you reduce the concentration risk that makes portfolios vulnerable to a single event or sector.

The tariff disputes of recent years illustrate this clearly. Investors with portfolios concentrated in directly affected markets faced disproportionate losses. Those with broader diversification were better insulated. A well-spread portfolio will not prevent all losses in a downturn, but it significantly reduces the impact of any single shock.

Rebalance regularly

Market movements naturally cause the composition of a portfolio to drift over time. A strong run in equities, for example, may mean you are now holding a higher proportion of stocks than your risk profile intends. Left unchecked, this can leave you taking on more risk than you are comfortable with.

Periodic rebalancing brings your portfolio back to its intended structure, selling some of what has grown and adding to what has lagged. It imposes discipline and keeps your strategy aligned with your actual goals and risk tolerance rather than wherever the market has taken you.

Let time work for you

One of the greatest advantages available to long-term investors is time itself. Starting early and staying invested allows the effects of compounding to build: returns on returns, year after year. The longer you remain invested, the more opportunity you have to recover from temporary setbacks and benefit from the general upward trajectory that diversified portfolios have historically delivered over the long term.

For investors with longer time horizons, short-term volatility is less of a threat and more of a feature of the journey. Understanding this can make it considerably easier to resist the urge to act when markets are uncomfortable.

Invest regularly rather than trying to time the market

Trying to identify the best moment to invest is notoriously difficult, even for professional fund managers. A more effective approach for most people is to invest a consistent amount at regular intervals, regardless of market conditions. This approach, known as pound-cost averaging, means you buy more units when prices are lower and fewer when they are higher, smoothing out the impact of volatility over time.

It also removes the psychological burden of trying to pick the right moment and helps maintain the habit of investing consistently across all market conditions.

What this means for your portfolio

If recent market uncertainty has left you questioning whether your investment strategy is still right for you, the most useful first step is to review your current position calmly: what you hold, why you hold it, whether your risk profile has changed, and whether your portfolio is still structured to deliver what you need over your intended time horizon.

We work with investors across Worcestershire and Warwickshire to build and maintain investment strategies built around their individual goals and circumstances. If you would like to review your position, we are happy to talk it through.

The value of investments can fall as well as rise. You may get back less than you invest. Past performance is not a guide to future performance. This article is for information only and does not constitute personal financial advice.

Navigating Market Uncertainty