Should I pull my money out of the stock market? What to do (and what not to do)

When the stock market suddenly dips, it's natural to feel anxious. Watching your investment account drop in value can trigger the question: Should I pull my money out of the stock market?

The urge to protect your hard-earned savings is understandable—no one enjoys seeing losses accumulate during periods of volatility. But while it may be tempting to safeguard your money, making an emotional decision during turbulent times could undermine your long-term financial goals.

Don't let fear and uncertainty force your hand. Before you act, consider multiple angles, weighing both the risks of staying invested and pulling out of the market too soon.

One of the most time-tested principles of successful investing is the idea that time in the market beats timing the market. This phrase speaks to the difficulty—some would say impossibility—of consistently predicting when the market will rise or fall. Even seasoned professionals rarely get it right 100 percent of the time. The challenge is twofold: Not only do you have to decide when to get out, but you also need to know when to get back in.

Missing just a few of the market's best days can have a dramatic impact on your overall return. For example, over a 20-year period, being out of the market for the top 10 performing days could cut your total returns in half. So while pulling your money out of the market may help you avoid short-term losses, it also carries the risk of missing the rebound. History has shown that some of the strongest market gains often follow on the heels of steep declines—meaning that timing the market by hastily selling your investments could cause more harm than good.

If selling your investments seems like a good idea, you may be planning to "sit it out" in cash until things feel safer. While cash does provide stability in the short term, it comes with an often-overlooked drawback: opportunity cost. Cash typically earns very little return, especially after factoring in inflation. Over time, this erosion of purchasing power can be significant.

For example, inflation averages about 3% per year, and your money loses more value while it's sitting in a non-interest-bearing account. Meanwhile, a well-diversified investment portfolio, despite some ups and downs, has historically outpaced inflation and generated growth. By holding onto too much in cash, you might miss the opportunity for your money to grow in line with your long-term financial goals, such as retirement savings.

So while holding cash may feel like a safe move in volatile times, it's important to recognize that avoiding short-term losses could come at the expense of long-term gains.

Remaining invested—even during rocky times—can be one of the most effective ways to build your wealth over time. This strategy allows you to benefit from compounding, where your investments generate their own earnings. The longer you're invested, the more compounding works in your favor. But compounding requires consistency, and interruptions, like pulling out of the market, disrupt its potential.

Additionally, the stock market has a strong historical track record of recovery. While no one can guarantee future results, past bear markets historically have been followed by bull markets, often when investors least expect it. Staying the course keeps you positioned to participate in those rebounds. And if you're regularly contributing to your portfolio during downturns, you're essentially buying shares at a discount—another benefit that can pay off when the market eventually rises.

Long-term investing means staying the course. A single year of losses doesn't define your portfolio's future. In fact, those who remained invested through past downturns—like the 2008 financial crisis or the early 2020 COVID shock—often were rewarded for their patience in the years that followed.

Related reading: Dollar cost averaging explained, with examples

The question "Should I pull my money out of the stock market?" deserves careful thought—especially in uncertain times. While the fear of loss is natural, reacting emotionally can jeopardize the goals you've been working toward. Markets are unpredictable in the short term, but they've shown to be resilient over time.

Remember:

• Successfully timing the market is incredibly difficult, and missing even a few key days can drastically reduce your returns.
• Holding cash may feel safe, but inflation can quietly chip away at your purchasing power.
• Staying invested allows for compounding to work, positioning you for potential recovery and growth.

Rather than making a quick decision in a moment of anxiety, consider speaking with someone who can help you evaluate your options through an objective lens. Work with a Thrivent financial advisor to assess your unique situation, update your investment strategy if needed and feel more confident in your financial journey—no matter what's happening in the markets.