Investors warned against panic selling during volatility

Binaya Dahal

Editorial Intern, Financial Newswire

12 March 2026

Panic selling during periods of heightened geopolitical turmoil can be one of the most expensive mistakes an investor makes, says Duncan Lamont, Head of Strategic Research at Schroders.

Lamont said while shifting money out of stocks and into “safe haven” assets like short-term government bonds may seem like a prudent response, history suggests that trying to time the market generally doesn’t pay off.

“Market disruptions after major geopolitical events have historically been short-lived, and markets have quickly recovered as the alarming headlines fade,” he said.

“Recoveries can come in abrupt bursts, and investors risk returning to the market after the biggest uptick has occurred. Selling equities amid turmoil can mean investors merely capture losses in a short-term downturn.”

He noted that in 31 of the past 54 calendar years, global equities experienced a decline of 10% or more at some point during the year. Further, they saw a decline of 20% or more in 13 of those years.

But even when markets experienced major downturns, average gains during the year historically more than offset the losses, as per Lamont.

“In periods of uncertainty or shock, markets can often sell off indiscriminately. Good companies are sold alongside bad ones, becoming “mis-priced”. Staying invested makes sense,” he said.

“Experienced, “active” investors might even go further and find buying opportunities within the turmoil. In the past, investors who shifted into cash during volatile markets would have greatly reduced their long-term gains.”

Moreover, Lamont pointed that the price of being skittish has been high. Investors who moved into cash when the Chicago Board Options Exchange Volatility Index (VIX) was above its historical average, and then returned to stocks when the VIX fell below that average, reduced their returns since 1990 by nearly 80%.

Even disciplined strategies that exited only when volatility reached the top 5% of the VIX’s historical range still cut returns nearly in half compared with what could have been realised.

Regarding cash, Lamont said while it may seem safe, it has rarely matched equities in delivering inflation-beating returns, with stocks outperforming cash 87% of the time over 10 years and 100% over 20.

“It suggests an impulsive reaction that can have unintended negative consequences. For equity markets, history certainly shows the value of not panicking amid market turmoil,” he said.