Volatility Is Uncomfortable, Not Dangerous: Why Panic Selling Has Cost Investors More Than Any Market Crash

Watching daily stock performance or the movements of your portfolio may not be easy these days. The S&P 500 has swung from gains to losses amid a variety of concerns, from questions about the pace of artificial intelligence (AI) spending to worries about conflict in Iran and its potential impact on the economy.

So now is a great time to talk about market volatility and how to handle such tough moments. Volatility is definitely uncomfortable, but the good news is it isn't dangerous. In fact, history shows us that panic selling has cost investors more than any market crash. Let's zoom in for a closer look.

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Tumultuous times for the S&P 500

As mentioned, the S&P 500 has been going through turmoil in recent weeks -- and investors have expressed concern about company-specific issues as well as broader geopolitical and economic issues. They've worried that companies might spend too much on AI, and the benefits from this spending will fall short of expectations. And uncertainties about import tariffs, the pace of interest rate cuts, and most recently, the war in Iran represent additional potential headwinds for the economy and for stocks.

All of this has created volatility in the stock market, with the S&P 500 fluctuating between optimism and pessimism in a very short period of time. Against this backdrop, you may be tempted to sell -- and buying stocks may be the last thing on your mind.

But before you make any moves, consider the following. Yes, volatility is uncomfortable, but it actually isn't dangerous. History shows us that these periods don't last forever, and indexes have always gone on to recover.

The Motley Fool studied the performance of the S&P 500 and the Nasdaq during every recession since 1980. Stocks suffered during recessions, of course, but they always recovered and gained in the following years.

From declines to recovery

Here are some specifics: During the COVID-19 recession in 2020, the S&P 500 fell more than 33% from its highest point during the recession, and the Nasdaq dropped about 30%, according to the research. Both recovered and roared to record levels through early 2022.

If you sold your falling stocks during those tough moments, you suffered a loss -- but, by holding on all the way through the crash and into the recovery and growth phase, you might have scored a significant win.

So what does this mean for you as an investor now? We're not in a recession, but we are seeing stock market turbulence that's led to falling valuations. Right now, you can make two wise moves: Hold onto your positions and go bargain hunting for quality stocks. History shows us that today's volatility is temporary, and a long-term view is the key to an investing win.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.