2025 Teaches the Wisdom of Buy and Hold Investing
- The 2025 market rollercoaster has offered yet another real-world lesson in the value of long-term investing.
- The rapid recovery for stocks also highlights the folly of market timing.
Just weeks ago, the S&P 500 flirted with a bear market, dipping nearly 20% from its February all-time highs amid fears of prolonged trade conflicts and a potential recession. Yet, this week, the index clawed back into positive territory for the year—marking one of the swiftest market recoveries in decades.
For financial advisors, this dramatic turn serves as a powerful reminder of the benefits of the buy-and-hold strategy. While short-term volatility may challenge client conviction, this year's rebound underscores how staying invested through turbulent times can lead to stronger long-term outcomes.
The rapid recovery for stocks also highlights the folly of market timing, illustrating that missing the best days in the market can dramatically reduce long-term returns.
Why Market Timing Usually Fails
Advisors know that market timing is a seductive but flawed tactic. The challenge isn’t just getting out before a decline—it’s getting back in at the right time. History shows that many of the market’s strongest days come immediately after sharp downturns and missing even a few of these can dramatically erode returns.
According to a JPMorgan Asset Management study, an investor who remained fully invested in the S&P 500 for the past 20 years would have seen a return of 10.6% annually. But if they missed just the 10 best days over that 20-year period, their return would drop to 6.4%. Missing the top 20 days? The return falls to 3.7%.
In fact, the majority of the best 10 days typically occur within two weeks of the worst 10 days, making timing the market nearly impossible to execute effectively.
In 2025, this pattern played out once again. Investors who sold at the April 8 bottom—when the S&P 500 was down nearly 20%—and hesitated to reenter missed a massive 9.5% gain on April 9, a recovery that followed on the heels of easing trade tensions.
Helping Clients Stay the Course
Advisors have a crucial role to play in guiding clients through emotionally charged markets. Teaching the importance of discipline—particularly in turbulent times—can set expectations and build long-term trust. Rather than panicking during downturns, clients who understand the historical precedent of recovery are more likely to remain committed to their financial plans.
Encouraging younger, more aggressive clients to rebalance or buy into stock ETFs during a correction can be a strategic move that positions portfolios for recovery. For clients in retirement or nearing it, diversification into fixed income, dividend-paying stocks and alternative assets is key to managing volatility while still capturing growth potential.
By clearly communicating these principles—and backing them with data—advisors can help clients tune out the noise, avoid knee-jerk reactions and remain focused on long-term objectives.
Looking Ahead: Volatility May Continue
While the recent rally is encouraging, advisors should continue to emphasize prudence. The economic impact of evolving trade policies, sticky inflation and slowing global growth is still unfolding. Markets may remain choppy through the rest of 2025, and further volatility is likely.
Still, the buy-and-hold strategy—paired with smart diversification—remains one of the most effective tools for long-term wealth creation. For advisors, this year’s market turnaround is a valuable teaching moment: Staying the course isn’t just wise—it’s often the most profitable move an investor can make.
