Five common mistakes investors make when markets get wild

Key points

• Emotions are the enemy in volatile markets – Panic selling, overtrading, and chasing excessive safety often lead to poor outcomes. Instead, stay focused on your long-term plan and avoid knee-jerk reactions.

• Use volatility to your advantage – Build a watchlist of high-quality ETFs, practice disciplined dollar-cost averaging, and rebalance when needed. These are simple, repeatable actions that can turn downturns into opportunity.

• Stay informed and use your tools – From screeners to market updates and trade signals, Saxo offers everything you need to navigate market stress with confidence.

When markets get rocky, instincts often take over—and not in a good way. Volatility can trigger the kind of gut reactions that hurt portfolios more than help them. Whether it’s fear of losing money, frustration from watching gains evaporate, or the pressure to do something, investors often fall into familiar traps.

The good news? These mistakes are avoidable. Knowing what to look out for can be half the battle.

1. Panic selling: Turning volatility into a loss

One of the most common mistakes in a downturn is bailing out at the worst possible time. Selling when prices are falling might feel like cutting losses, but more often, it locks them in.

A better approach: Instead of reacting emotionally, ask: Has the long-term thesis changed? If not, it might be a time to hold—or even buy selectively. Markets have historically rewarded patience.

2. Market timing: The mirage of the perfect exit and entry

Trying to sidestep volatility by timing the perfect in-and-out? That’s a slippery slope. Missing just a few of the best rebound days can have a major impact on long-term returns.

A better approach: Dollar-cost averaging during choppy periods can help reduce regret and smooth out entry points. Staying invested—rather than guessing when to jump in—often leads to better outcomes.

3. Chasing “safe” assets: Flight to (too much) safety

In risk-off mode, many investors pile into cash or low-yielding assets. While there’s nothing wrong with dialing back risk, going too conservative can mean missing the rebound when it comes.

A better approach: Think of diversification as a shock absorber. Shifting some assets to more defensive sectors (like healthcare or utilities) or dividend stocks can reduce volatility while keeping you in the game.

4. Neglecting the plan: Strategy goes out the window

Volatile markets can make even seasoned investors second-guess their strategy. But changing your plan mid-storm is like redesigning a ship while sailing through a hurricane.

A better approach: If your investment plan is grounded in your goals and risk tolerance, trust it—especially when things feel shaky. Periodic rebalancing, not emotional reactions, should guide adjustments.

5. Overtrading: When activity masquerades as control

Market swings can tempt investors into frequent trades, hunting for quick wins or avoiding losses. But all that trading can rack up fees and tax consequences—not to mention stress.

A better approach: Sometimes the smartest move is no move at all. Focus on high-conviction ideas and long-term positioning rather than reacting to every headline or price swing.

What can investors do right now?

We compiled an Investor FAQ on the market downturn last month, packed with answers to the most common concerns: Should I sell? Are we at the bottom yet? What could be the signs of a turnaround? How do I know when it’s time to buy again?

Here’s how to stay proactive—and calm—in a volatile market:

1. Build a watchlist of high-quality ETFs

Volatility often presents great entry points into well-diversified vehicles. Here is how you can create a watchlist on SaxoTraderGo. Also, watch this video to create dynamic watchlists on SaxoTraderGo using the screener.

Some options to consider:

• iShares Core S&P 500 UCITS ETF – Direct exposure to U.S. large caps.

• Invesco Nasdaq-100 UCITS ETF – For those bullish on tech and growth stocks.

• iShares Core MSCI World UCITS ETF – Global equity exposure.

• Vanguard FTSE All-World UCITS ETF – Diversified global markets, including emerging markets.

• Amundi MSCI USA Minimum Volatility Factor UCITS ETF – For those seeking lower-risk U.S. exposure.

• SPDR S&P Euro Dividend Aristocrats UCITS ETF – For income-focused investors in Europe.

• iShares China Large Cap UCITS ETF – For contrarian exposure to Chinese blue chips, many of which are still trading at discounts.

• KraneShares CSI China Internet UCITS ETF – A play on China tech giants like Alibaba, Tencent, and Meituan.

2. Practice Dollar-cost averaging

Don’t wait for the perfect bottom. Invest regular amounts over time. This removes emotion and spreads your entry price—especially useful when markets are bouncing around.

3. Rebalance when necessary

Set up rebalancing alerts to flag when your allocations drift too far from target—say ±5%. This helps you trim stretched positions and add to underweights systematically.

4. Stay informed with in-platform research

Leverage screeners, market updates, and trade signal tools to evaluate new opportunities without chasing headlines.

5. Write down your investing plan

Even a short note can anchor you: “I’m investing for the next 10 years, targeting long-term growth. I accept short-term dips and rebalance yearly.” It’s surprisingly effective at calming nerves.

Reminder: What happened after the COVID crash?

A little perspective goes a long way. Let’s rewind to March 2020:

• The S&P 500 dropped ~34% in just over a month

• By August 2020, it had fully recovered

• By end-2020, it finished the year up ~16%

• The Nasdaq-100 surged ~48% in 2020, driven by tech leadership

• Investors who put €10,000 into broad ETFs like MSCI World near the bottom saw their investments grow to over €15,000 in 12 months

• Even more surprising? China tech ETFs like KWEB more than doubled in value from their 2020 lows within a year.

A lesson from S&P 500 in COVID: From -35% to full recovery in months. Source: Bloomberg 

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