When uncertainty hits the markets, it’s hard not to let anxiety take over.
6 min read
The following statements do not constitute investment advice or any other advice on financial services, financial instruments, financial products or digital assets. They are intended to provide general information. Stocks and ETFs are subject to high fluctuations in value. A decline in value or a complete loss is possible at any time. The loss of access to data and passwords can also lead to a complete loss.No market grows in a straight line. Recessions, dips, and corrections have always been part of the economic cycle. For investors, the challenge isn’t to dodge them, but to understand them. That said, it's often difficult not to let market instability get the best of us. Sudden dips and drops can feel unsettling, prompting many to wonder if they should act quickly to avoid losses. With the right perspective, however, it becomes easier to tune out short-term noise, keep a cool head, and stay committed to long-term financial goals.
An emotional rollercoaster
When uncertainty hits the headlines — be it economic shifts, political shake-ups, or global surprises — investors don’t always act logically. They react, often with a heady mix of optimism and fear. Here’s how it tends to go: When markets are climbing, excitement ramps up and FOMO pushes people to jump in, hoping to ride the wave. But when things start to dip, the panic hits. People pull out, trying to limit losses — and in the process, they sometimes make those losses unavoidable. The result? More volatility.When it comes to the stock market, our emotions tend to be running the show. This is perfectly human, but not always helpful. The key is recognizing this pattern and learning to zoom out. When you’ve got long-term goals in place, staying calm and resisting knee-jerk decisions is often the best thing — although it’s the one thing that many people don’t do.
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Market ups and downs aren’t bugs in the system. They are the system. For example, the EU faced major recessions in the 1970s and the early 1980s due the oil crises, in the early 1990s due to the fall of the GDR, in 2008 due to the financial crisis which was then followed back to back by the 2011 sovereign debt crisis, and then the 2020 pandemic recession. That’s six recessions since the 1970s alone! So, if you're saving and investing over several decades, you can expect to live through more than a few. That might sound unsettling, but it can also be empowering. When you know that downturns are part of the natural cycle and not necessarily signs of doom, you can start planning for them, rather than panicking. Of course, history isn’t a crystal ball. No one can predict exactly what the future holds. But understanding the overall rhythm of the past can help you keep your cool when things feel shaky. Weathering storms is just part of any investment journey.
Why trying to time the market can be a losing game
The problem with panic selling is that it often means locking in losses and missing out on any potential rebound. The market’s best days tend to huddle up right next to its worst ones. According to analysis from Wells Fargo Advisors, the S&P 500’s average annual return over a 30-year period was 8.0%. But if an investor withdrew their money for just 10 of the best-performing days during that time, then their returns would have shrunk to 5.26%. If they missed 30 of them? That figure drops to 1.83%, not even enough to outpace inflation.Even more surprising? Those high-return days often happen during bear markets or recessions, exactly when nerves are frayed and investors are most likely to pull out of the market. Meanwhile, some of the worst days? They’ve happened in the middle of booming bull markets, when confidence was sky-high.So, what does all this mean? Timing the market perfectly, i.e. avoiding the worst days while catching the best, is next to impossible, and trying to do so could leave you worse off than if you’d just stayed put. Keeping a cool head and sticking to your long-term plan, even when things look rocky, can be your best shot at success.
Perspective is more powerful than prediction
When markets swing, it’s easy to get caught in the chaos. But one of the most powerful tools in your financial toolkit isn’t timing or technical know-how — it’s perspective. Yes, markets rise and fall, often daily, sometimes dramatically. But if you take a step back, a different picture emerges. Though past performance isn’t a prediction of future results, over time, the trend has historically pointed upward, despite wars, recessions, crashes, and crises. That’s not to say you should ignore the headlines. Just don’t let them dictate your entire financial strategy. Instead, smart investing is less about reacting and more about preparing. Build a plan that can handle a few bumps: an emergency fund, a diversified portfolio, and the mindset to ride out the noise. Whether it’s a job loss throwing you a personal curveball or a broader economic downturn, having a cushion can make a tough moment feel a little less sharp.
Diversification, the quiet overachiever
There’s no perfect shield against market volatility, but diversification comes pretty close. A diversified portfolio spreads your risk across different asset classes, regions, and sectors. When one part takes a hit, another might hold steady, or even rise. This could mean going beyond home turf, like balancing European stocks with U.S. ones or blending growth sectors with more stable, “boring but reliable” industries. Even within your stock investments, choosing companies from different sectors helps reduce the chance that a single bad headline sends your whole portfolio south.But a quick word of caution: Diversification doesn’t mean throwing your money in every direction and hoping for the best. It should be intentional and balanced. The goal isn’t to avoid risk entirely, but to spread it wisely so one downturn doesn’t derail your entire financial future. In short? A well-diversified portfolio might not grab headlines, but it quietly does its job, helping you stay the course even if the markets are in free-fall.
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Volatility isn’t a reason to panic — it’s a reason to plan. With N26, you can invest in a wide range of stocks and ETFs directly from your app, with no guesswork or jargon required. Whether you're just getting started or building on what you already know, our tools are designed to help you invest confidently, even when the market feels unpredictable.
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