Posted by Andy Wearing, Director - July 2026

There are times when investing feels difficult because markets are falling.

And there are times when investing feels difficult because markets have risen so far, so quickly, that the next fall starts to feel inevitable.

The second situation can be surprisingly uncomfortable.

When markets are down, the worry is obvious. Portfolios have fallen. Headlines are negative. Investors wonder whether things will get worse.

But when markets are strong, the anxiety can be more subtle. Valuations may look stretched. A small number of companies may appear to be driving much of the market’s return. Certain themes — technology, artificial intelligence, or whatever the investment story of the moment happens to be — can begin to dominate attention.

At that point, two instincts often appear at the same time.

One is fear of missing out.

The other is fear of being caught out.

Both can lead to poor decisions.

Strong markets can be just as testing as weak ones

Most investors understand, at least in theory, that market downturns are part of investing.

What is less often discussed is how difficult strong markets can be.

When a particular sector, theme or region performs exceptionally well, it can start to feel as though everyone else has found an easier route. The temptation is to lean further into whatever has already worked.

At the same time, the very strength of the market can make people nervous. Investors look at how far prices have risen and begin asking whether now is the moment to take money off the table.

So the same market can produce two opposite impulses:

Buy more of what has gone up.

Or sell because it has gone up too much.

Both responses are understandable. Neither is a reliable investment strategy.

This is one of the reasons we believe so strongly in being goal-focused and plan-led. Without a clear plan, investors are left trying to interpret the mood of the market. And the market’s mood changes constantly.

Expensive does not mean immediate

One of the most common mistakes investors make is assuming that if something looks expensive, it must fall soon.

That may sound logical, but markets rarely work to such neat timetables.

An expensive market can become more expensive. A popular theme can remain popular for longer than expected. A warning that seems sensible can be years early — and in investment terms, being years early can still be very costly.

This does not mean valuations are irrelevant. They matter. They can influence long-term returns, and they can tell us something about the level of optimism already reflected in prices.

But valuations are much better at shaping expectations than setting alarm clocks.

They may suggest that future returns could be lower, or that a market is more vulnerable to disappointment. They do not tell us precisely when to exit, when to return, or what will happen next month.

That distinction matters.

Because a decision to “wait until things look better” requires two correct calls, not one.

First, you have to know when to get out.

Then, often under pressure and amid uncertainty, you have to know when to get back in.

Very few investors can do either consistently. Almost nobody can do both.

Corrections are normal, not failures

At some point, markets will fall again.

We do not know when. We do not know what the trigger will be. We do not know whether the next decline will be mild and brief, or sharp and uncomfortable.

But we do know that declines are a normal feature of equity investing.

They are not a sign that the system has broken. They are not evidence that long-term investing has stopped working. They are the price investors pay for participating in the long-term growth of companies and economies.

This is easy to say when markets are calm. It is harder to remember when prices are falling and the headlines are written to provoke anxiety.

But it remains true.

The long-term investor’s task is not to avoid every decline. That is not realistic.

The task is to build a plan that can withstand them.

That means holding appropriate cash reserves. It means ensuring withdrawals are planned sensibly. It means diversifying across regions, sectors and asset classes. It means rebalancing when appropriate. And it means understanding, in advance, that your portfolio will not move in a straight line.

A plan that depends on markets always feeling comfortable is not really a plan.

The problem with reacting to the market’s latest story

Every period has a dominant investment story.

Sometimes it is property. Sometimes it is emerging markets. Sometimes it is commodities. Sometimes it is technology. Sometimes it is cash, especially after interest rates have risen.

The story changes, but the pattern is familiar.

A theme performs well. More people notice. More money follows. The story becomes more persuasive because the recent returns appear to confirm it. Eventually, some investors begin to treat what has happened recently as though it must continue indefinitely.

That is usually when discipline becomes most valuable.

The purpose of diversification is not to ensure every part of your portfolio is exciting at the same time. In fact, a properly diversified portfolio will almost always include something that feels disappointing.

That can be frustrating.

But it is also the point.

Diversification means accepting that you will never have all your money in the best-performing area of the market. In return, you reduce the risk of having too much money in the worst-performing area when leadership changes.

And leadership always changes eventually.

Rebalancing: a quiet discipline

One of the most useful habits in long-term investing is also one of the least dramatic: rebalancing.

Rebalancing does not rely on market predictions. It does not require us to know which sector will lead next year. It simply brings a portfolio back into line with its intended structure.

When one part of the portfolio has grown strongly, rebalancing may involve trimming it.

When another part has lagged, rebalancing may involve adding to it.

This can feel counterintuitive. It often means selling some of what has recently done well and buying some of what has recently disappointed.

But that is precisely why it is valuable.

It introduces discipline at moments when emotion might otherwise take over. It helps prevent a portfolio from becoming accidentally overconcentrated. And it keeps the investment strategy aligned with the financial plan, rather than allowing recent market performance to quietly rewrite the plan on the client’s behalf.

Rebalancing is not a guarantee of better returns. Nothing is.

But it is a practical way of ensuring that a portfolio remains intentional.

The real question is not “What will markets do next?”

Investors naturally want to know what happens next.

Will markets keep rising? Will technology continue to dominate? Will interest rates fall? Will inflation return? Will the next correction be shallow or severe?

These are reasonable questions.

But they are not always useful ones.

A better set of questions might be:

Does my financial plan rely on short-term market predictions?

Is my portfolio still aligned with my long-term goals?

Do I have enough liquidity for planned withdrawals and unexpected needs?

Am I taking enough risk to give my plan a reasonable chance of success?

Am I taking more risk than I can emotionally or financially withstand?

These questions are less exciting than market forecasts. But they are far more valuable.

Because unlike the next market move, they are within our control.

Staying invested does not mean ignoring risk

It is important to be clear about this.

Staying invested is not the same as being complacent.

It does not mean pretending markets are cheap when they are not. It does not mean ignoring concentration risk. It does not mean assuming that every fashionable investment theme will deliver on every expectation.

It means recognising that risk is managed through planning, diversification, discipline and time — not through repeated attempts to jump in and out of markets.

There may be times when a client’s portfolio should change.

But those changes should usually be driven by changes in the client’s life, objectives, time horizon, spending needs, tax position or tolerance for risk.

They should not be driven by the market’s latest mood swing.

The value of advice in moments like this

The greatest value of financial planning is not only found during market falls.

It is also found during strong markets, when confidence is high, valuations are debated, and speculative stories become increasingly tempting.

At these times, good advice helps clients avoid two opposite mistakes: becoming too fearful, or becoming too enthusiastic.

Both can be damaging.

One may lead to selling quality investments too soon.

The other may lead to chasing areas of the market that have already done exceptionally well.

The role of an adviser is to bring the conversation back to the plan.

Not because markets do not matter.

But because your goals matter more.

A calmer way to think about uncertain markets

There is nothing unusual about uncertainty.

There is nothing unusual about market concentration.

There is nothing unusual about investors worrying that a correction may be coming.

And there is nothing unusual about markets continuing to surprise almost everyone.

That is why the foundation of a good investment strategy cannot be prediction. It has to be preparation.

Preparation means knowing that markets will fall from time to time.

It means accepting that some parts of the portfolio will always look better than others.

It means resisting the temptation to chase what has just worked, or abandon what has temporarily disappointed.

And it means remembering that the objective is not to win every quarter, every year, or every market cycle.

The objective is to give your long-term financial plan the best chance of working.

That is a quieter aim than trying to outguess the market.

But for most families, it is a far more important one.

Important information

This article is for general information only and does not constitute personal financial advice, a personal recommendation, or an offer or solicitation to invest. It does not take into account your individual objectives, financial situation or needs.

The value of investments, and the income from them, can fall as well as rise, and you may get back less than you invest. Past performance is not a reliable indicator of future results. Markets can be volatile and there is no guarantee that any investment strategy will achieve its objectives.

If you are unsure whether an investment or financial planning strategy is suitable for you, please speak to your Oak Four planner or seek regulated financial advice.

Oak Four Limited is authorised and regulated by the Financial Conduct Authority.