investor fear — Investor fear during the turbulent early months of 2025 taught many a costly lesson about the pitfalls of market timing, according to Kyriacos Inios, Secretary of CFA Society Cyprus. As financial markets faced heightened anxiety, particularly in April, the temptation to sell became overwhelming for numerous investors.
Inios recalls the pervasive unease that characterised the market at that time, with trade war rhetoric escalating and prices plummeting daily. “If you caught yourself thinking, ‘Maybe I should just sell for now until things settle’, you were not alone,” he shares, noting a significant number of anxious investors reached out to the society for guidance.
During this challenging period, the reality of market dynamics became stark. Inios highlights that the greatest risk to capital often stems not from economic conditions but from investors’ reactions to them. In the first quarter of 2025, markets entered a steady decline as fears surrounding the trade war intensified.
By early April, market sentiment had reached a low point, with news coverage predominantly negative. This negativity culminated in a significant sell-off; on April 3, the S&P 500 dropped by 4.8%, followed by an additional 6% decline the next day. “The turning point came on April 9, 2025,” Inios explains. The announcement of a ’90-day tariff pause’ shifted market sentiment dramatically, leading to a nearly 10% rise in the S&P 500 in a single day.
Inios emphasises that such events reinforce a critical rule of investing: the best market days often occur during bear markets when pessimism peaks. Historical examples abound, such as the 10.8% surge on October 28, 2008, amid the global financial crisis, and the sharp rebounds seen in March 2020 during the Covid-19 pandemic. Those who sold just before these key moments missed out on some of the strongest returns of the decade.
Data from J.P. Morgan Asset Management illustrates the potential cost of missing out on these opportunities. A $10,000 investment in the S&P 500, if left untouched over 20 years, could grow to roughly $72,000. However, missing just the ten best days during that period would reduce that final value to about $33,000. Inios explains that the best days often occur within two weeks of the worst days, making impulsive selling to avoid further losses a mathematically flawed strategy.
Behavioural finance offers insight into this tendency, with Inios noting that the pain of a portfolio decline feels about twice as intense as the pleasure derived from a rise. This instinct, known as loss aversion, often leads investors to sell at the bottom, just before a market rebound. To counteract this, he recommends a disciplined approach to asset allocation.
According to Inios, funds needed within zero to twelve months should be held in cash or cash equivalents, while capital required over a one-to-five-year horizon should be placed in stable assets like bonds. Only funds with a time horizon of five years or more should be exposed to the volatility of the stock market. He characterises equities as a vehicle for long-term wealth rather than a bank account for immediate needs.
Understanding the fundamental value of a business also provides an essential anchor during volatile periods. Investors focused on long-term value drivers, rather than short-term price fluctuations, are less likely to panic. Looking ahead, Inios warns that fear will surely resurface, potentially as soon as 2026 or later. He concludes that recovery often arrives suddenly and without warning, stressing that over time, markets reward patience, discipline, and a clear strategy over impulsive reactions to fleeting news.
