The ongoing conflict in the Middle East adds another layer of anxiety for investors already uneasy about the state of the market. This concern is compounded by the looming threat of a possible bubble burst in AI stocks.

Amidst this uncertainty, many investors are contemplating whether they should liquidate their stocks and shift towards more secure options like cash deposits.

History, however, consistently demonstrates that reacting with panic and selling off investments is rarely the right move.

Over the past century, through numerous economic booms, crashes, and crises, the evidence is clear: those who maintained composure and held onto their investments generally fared better than those who opted to sell in fear.

The takeaway is straightforward. Although it might feel counterintuitive, continue investing, resist the urge to ‘time’ the market, and most importantly, craft a strategy and adhere to it.

Focus on a diversified portfolio, maintain a long-term perspective, and remember to stay calm and carry on.

On a very long view, shares have kept pace with inflation and outperformed cash and bonds, despite multiple wars and crises. 

Evidence: More than a century of booms, crashes and crises shows panic selling is almost always the wrong instinct

World War I is before my time, but at the outset, shares fell 30 per cent. By 1915, they were up 88 per cent.

As for the FTSE 100, it was barely three years old when it faced its first big crisis. 

On Black Monday, 19 October 1987, it fell 10.8 per cent and then a further 12.2 per cent the following morning in the biggest market decline since the Wall Street Crash of 1929. 

Fortunes evaporated in hours. It recovered its previous value in a little over two years.

The dotcom boom and bust of 2000 to 2003 took longer: seven years for the FTSE 100 to regain its previous highs. 

Yet the picture, viewed from a distance, was not so grim for investors who had spread their risks. 

The distortion caused by overvalued technology companies meant most other sectors were performing reasonably well throughout. 

The lesson is subtler than in 1987: diversify, and resist the temptation to chase the craze of the moment. The current equivalent, of course, being AI.

The collapse of Lehman Brothers in September 2008 felt at the time as though the entire capitalist system was falling to its knees. 

The FTSE 100 sank from 6,730 to below 4,000 over 18 months, recording a fall of 31 per cent in 2008 alone, and it was not until 2014 that it recovered its previous level. 

But those who fled into bonds or savings accounts found that, having locked in their losses, they then faced years of near-zero interest rates that eroded the real value of their holdings.

The pandemic crash was the fastest and most violent in the FTSE 100’s history. 

By 23 March 2020 it had lost more than a third of its value in weeks. But by early 2025 it was trading 18 per cent above its pre-Covid level, excluding dividends. 

Those who sold in panic had missed one of the sharpest recoveries in market history.

Donald Trump’s Liberation Day tariffs on 2 April 2025 produced among the worst two-day market performances in 40 years. 

The recovery was swift. By late June 2025 markets had reached new highs, and as of late February this year the FTSE 100 stood at a record closing high of 10,910.

The key to successful investment is: don’t follow the herd – have a plan. 

Markets move all the time, sometimes wildly, but if you have a plan that is designed to be resilient – have an emergency fund in cash, don’t put all your eggs in one basket, spread your share investments over different industries and markets – you should never need to panic.

Try to keep emotion out of the picture. More damage is caused to people’s wealth by emotional reactions than any other factor. A good adviser should act as a behavioural coach, to avoid that happening.

Although markets will be nervous in the days and weeks ahead, I’ll be counselling my clients to keep their cool.

Richard Watkins is a certified financial planner and chartered wealth manager at Continuum Financial Services LLP

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