Why Your Investment Time Horizon Matters

Market swings like the one we’ve seen recently can be unsettling, and you’re not alone feeling that way. Volatility is not uncommon—and it’s something we plan for.

The S&P 500 has slipped into correction territory and has dropped over 10% in just a short matter of time, a move that naturally grabs attention. When it comes to investing, context is everything, and your time horizon is one of the most important factors to consider.

Take a look at the chart below where the S&P 500 experienced similar sharp two-day drops. What stands out? Historically, the market tends to rebound over time. In fact, looking one year out from each of the following major drops, the average return was over 32%—and 100% of the time, the market was higher.

This doesn’t mean the market will always recover quickly—however, it does highlight how powerful time can be when it comes to investing.

Here are several key takeaways worth noting:

• If you need your money within the next 12–24 months, it likely shouldn’t be invested in the market. Short-term needs are better served in more stable places like money markets, CDs, or savings accounts where principal preservation is the priority.
  
  
• Positive historical returns after sharp drops. In every instance since 1950 where the S&P 500 has dropped 10% or more in two days, the index was higher 100% of the time one year later—with an average return of +32.6%. That’s not a guarantee for the future, however, it is a powerful reminder that markets tend to recover—and reward patient investors.
  
  
• If your goals are longer-term, this pullback could be an opportunity. History shows that these moments often provide a chance to invest in high-quality assets at a discount.

"During times of volatility it's important to remember time horizon and to rely upon the planning that we've done together. As part of our planning with clients, we seek to align risk and time horizon for different portions of a client's portfolio," said Randy Eveland, CFP, RICP, CDFA®, Wealth Advisor. 

While keeping an eye on market trends is important, investing is not about reacting to headlines. History reminds us that staying invested has often paid off. Smart investing is about aligning your portfolio with your goals, your time horizon, and your personal risk tolerance.

With the current levels of volatility we are seeing, coupled with low visibility on tariff policy, our team has postured a bit more cautiously in our tactical models and stand ready to deploy assets when we start to see a bottoming process develop.  

If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to contact us to set up time to discuss further.

Disclosures:

All indexes are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.