Why Market Volatility Shouldn’t Dictate Your Long-Term Investment Strategy
- Jul 1, 2025
- 3 min read
Updated: May 14
2025’s Geopolitical Drama & What It Means for Investors
2025 has been… dramatic to date. We kicked off the year with the new American presidency and all the geopolitical shake ups common with such change. 6 months down the line and we find ourselves concerned not over trade wars, but real wars.
For the last month, tensions in the middle east have been escalating as peace talks between Israel and Iran collapsed. Headlines are full of reports of attacks, counter attacks, ceasefires and the political and economic impacts on the globe. The disruption to oil-producing regions has left global fuel markets uneasy, and New Zealanders may soon see the impact at the gas station.
Investors may feel the panic set in with the inevitable change in the markets that typically follow global events, but we want to encourage you to pull back for a moment and have a look at the bigger picture. In the last 5 years alone, we have endured COVID-19, Russia invading Ukraine, US elections and Inflation squeezing budgets dry as well as huge tech events with the AI arms race as ChatGPT went viral. Despite these [massive] events, the markets have rebounded very well.
Market Performance: A Reality Check
Here’s how key benchmarks have performed over the past five years (2020–2024):
Index | 5-Year Growth (Approx.) | Notes |
S&P 500 (US) | ~90-100% | Pandemic rebound, tech/AI surge |
FTSE 100 (UK) | ~40-50% | Energy/mining stocks helped, but Brexit and inflation weighed |
NASDAQ (Tech-heavy) | ~100-120% | Driven by AI, megacaps (Nvidia, Apple) |
NZ 50 (NZX) | ~5-15% | Lagged due to higher rates, recession |
Bitcoin | ~1000+% (but volatile) | Peaked at ~$69K (2021), now ~$60K* |
The lesson? Markets recover. While short-term volatility is inevitable, a disciplined, long-term investment strategy has historically paid off.
The Market's Best Days Often Arrive When Conditions Feel The Worst.
It almost never feels like a good time to invest when markets are falling. Watching your KiwiSaver balance drop can trigger a strong urge to switch to a conservative fund or move to cash. Yet history shows that some of the most powerful single-day gains occur right in the middle of these downturns, not during calm, predictable periods. The reason is simple: sharp sell-offs are often followed by sharp rebounds. When fear is at its peak, markets can snap back violently, delivering those rare, high-impact days that make or break long-term returns. If you've already switched funds or sold out, you won't be there to catch that recovery - and missing just a handful of those unexpected best days can slash your final balance by hundreds of thousands of dollars.
So while a market downturn may feel like the worst possible time to invest, staying the course is what lets you benefit from the eventual rebound. You don't need to predict when the best days will happen; you just need to be present for them. By resisting the urge to react in fear, you turn a period that feels like a loss into the foundation of your long-term growth.
Why Headlines Shouldn’t Drive Your Long-term Investment Strategy
Markets Always Rebound – Even after major crises (2008 crash, COVID-19), markets have recovered and grown.
Timing the Market Rarely Works – Selling in panic often means missing the rebound.
Diversification Wins – A diversified portfolio can weather geopolitical shocks better than reactive trading.
New Zealand’s Unique Position – While global events impact us, local strategies (like property and agriculture) can provide stability.
Staying the Course: What You Can Do
Review (Don’t React) – Assess your portfolio’s long-term health, not daily fluctuations.
Focus on Fundamentals – Strong companies and sectors tend to outlast turmoil.
Consider Professional Advice – A tailored strategy helps navigate uncertainty.
At Naked Finance, we help investors cut through the noise and build strategies that endure. If you’re feeling uncertain about your investments - or just want a second opinion - get in touch today.
Because while the world keeps changing, your strategy doesn’t have to.
Market volatility is normal. Geopolitical drama is inevitable. But history shows that patient, well-planned investing beats knee-jerk reactions every time.
Need guidance? Let’s make sure your portfolio is built for the long haul.
