Market volatility dominates headlines, rattles investors and stokes plenty of fear.
Market volatility dominates headlines, rattles investors and stokes plenty of fear. Whether driven by rising rates, geopolitical risks or inflation fears, periods of market volatility raise the same question every time: should I buy stocks now or wait? What about cash I have on the sidelines?
Since 1977, we at The Prudent Speculator prefer to rely on fundamentals, quality and experience rather than emotion when market gyrations become large. Here’s what past market cycles tell us about investing during uncertain times.
Market Volatility Is Normal and Often Rewarding
Short-term market declines are common. Since 1976, the S&P 500 has had an average intra-year drop of 14.1 percent, including the years that ended with positive returns. Between 1976 and June 2, 2025, the S&P 500’s average annual return was nearly 10%!
The takeaway: Markets often fall but historically recover and grow.
History shows that buying during periods of market volatility (and often fear and lower prices) leads to strong long-term gains, though we also argue that simply staying the course (and staying invested) goes a long way in achieving that 10% average annual return figure.
Bear Markets Come and Go. Growth Compounds.
Over time, markets have bounced back from even severe declines. A few examples:
- After the 2008 crisis, the S&P 500 more than tripled in five years
- Following the COVID crash in March 2020, the market rebounded over 50 percent within six months
- Investors who stayed the course after the Dot-Com bubble recovered and saw solid returns over the next decade
Setbacks are temporary. Compounding returns over time is what builds lasting wealth.
Timing the Market Rarely Works
Waiting until “things feel better” is tempting, but usually counterproductive.
- Missing just the 10 best market days over 20 years can cut returns by more than half
- The strongest days often follow the worst, making it easy to miss rebounds
Rather than guessing when to buy, a better strategy is simple:
Invest regularly. Stay focused. Think long term.
How Prudent Investors Approach Market Volatility
Our Value investing philosophy thrives in all markets, but is particularly important to keep top-of-mind during periods of market volatility. We have found that pullbacks often create opportunities to buy quality businesses at discounted prices.
Here’s how we respond during volatile periods:
- Rebalance portfolios to align with long-term goals
- Focus on fundamentals like cash flow, valuation and earnings power
- Diversify across sectors and geographies to manage risk
- Stick to a strategy built for long-term results
This approach has guided us through countless market cycles.
Market Volatility Isn’t the Real Risk
Markets fluctuate. That’s a feature, not a flaw. The real risk lies in abandoning sound strategy during stressful times.
If you invest with a long horizon and a disciplined process, history is on your side.
So is now the time to buy? For patient investors, history suggests yes.
Stay Prudent. Stay Invested.
For over 48 years, The Prudent Speculator has helped investors navigate volatile markets and stay focused on long-term value. If you’re looking for guidance rooted in experience and discipline, we’re here to help.
