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Investing.com -- Investors spooked by recent market swings should resist the urge to sell, as staying invested through turbulent times has historically delivered stronger long-term returns, according to a new Wells Fargo (NYSE:WFC) report.
“Missing only a handful of the best days in the market can drastically reduce the average annual return of a portfolio over time,” the firm said, citing data from the past 30 years.
Wells Fargo found that missing the 30 best days of S&P 500 Index performance from April 1995 to April 2025 would have slashed annual returns from 8.03% to just 1.67%, below the average inflation rate over the same period.
The firm warned that recent volatility, driven by the Trump administration’s sweeping tariff announcements, highlights the dangers of trying to time the market.
On April 3, the S&P 500 shed $2.4 trillion in value, only to surge 9.5% days later after a temporary pause on tariffs. “This episode demonstrates the risks of trying to time tumultuous markets,” Wells Fargo said.
Rather than attempting to dodge downturns, Wells Fargo advised investors to “focus on longer-term implications” and rebalance portfolios during volatile periods.
“We believe staying fully invested in equity markets over a full market cycle can be more beneficial than selling into volatile markets and attempting to avoid the worst-performing days.”
The firm also sees opportunity amid the turmoil. “Periods of high volatility have historically led to enhanced equity returns,” it said, especially when the VIX—a gauge of market fear—exceeds 40.
Wells Fargo recommends favoring U.S. large- and mid-cap stocks over small caps, and developed markets over emerging markets, while selectively adding investment-grade fixed income.
“Concern is normal,” the firm concluded, “but we would advise investors to allay their fears and view the volatility as a potential opportunity.”