Should I pull my money out of the stock market? Pros & cons of staying invested

Has recent stock market activity left you feeling unsettled and questioning whether you should pull your money out of the market? You’re not alone. Market dips can trigger strong emotions, and the instinct to protect what you’ve built is understandable. But acting on instinct in a turbulent moment can unintentionally derail your long-term goals.

Instead of letting fear drive your next step, pause and look at the bigger picture. Consider the full range of risks—both of staying invested and of exiting the market earlier than intended—before deciding what’s best for your financial plan.

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: How consistent investing may reduce risk while building your portfolio

Decide where to keep your cash holdings

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Cost of cash

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.

Looking for up-to-date market insights? Explore the most recent commentary from Thrivent Asset Management.