MFS - Principles of Long-Term Investing Resilience

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It’s hard to stay calm when you’re bombarded by news about the economy and markets. Anxiety about your portfolio can creep in, and before you know it, a media barrage may turn your anxiety into panic. And if that’s not enough, investing has become more complex, pushing investors to take on more risk to achieve the same return they did 10 or 20 years ago.* So how do you keep calm when market volatility heats up? By considering the Principles of Long-Term Investing Resilience.

* Source: 2025 Callan, LLC. Hypothetical portfolios were created using historical index risk, return and correlations to achieve a 7.5% total return. Portfolios rebalanced monthly. All dates are as of December 31, 2024. Risk is measured by standard deviation. 
 

Key Points

Understand Market Movements

• A selloff, a correction, a bear market. Whatever it’s called, it can be unsettling; but, market declines are inevitable and completely normal.
• Time after time, the stock market has recovered from the disruptive, but ultimately short-term, declines and has gone on to post gains. 

Volatility Is Normal

• Markets are always moving — up, down and sideways. They rarely go straight up. 
• Over time, stock markets have moved higher, bouncing back from what prove to be short term declines. 
• And if you sell when the market falls, you’ll likely miss a rebound and any subsequent gains, possibly falling short of your goals. 

You Control Your Emotions and Behaviour

• A financial professional can help you determine your overall comfort level with risk. 
• Allocate, diversify and rebalance your assets accordingly. 
• Review your overall investment portfolio, at least annually, to help keep you focused and on course with your goals. 
• Choose investments aligned with your goals and risk tolerances and help you stay focused and on track as markets shift. 

Take a Longer View

• Historically, investing in stocks has been one of the best ways to build wealth, because of their long-term growth potential relative to bonds and/or cash.
• Yet many investors underinvest in stocks or try to time the market.
• In either case, investors could be  missing opportunities.
• That’s because over long periods of time, the stock market has historically generated positive returns. 
   

Compounding and How It Works

• Compounding occurs when an asset’s earnings, either gains or income, are reinvested to generate additional earnings.
• Compounding of gains and income over the long term is what typically drives most of the value in an investment or portfolio.
• Conservative investments like Treasury bills or even bonds may not provide the growth potential needed to achieve goals.
• Despite higher volatility, a more  aggressive investment, like  stocks, may provide the growth  potential needed to pursue goals. 

Diversification Benefits

• Markets change, and investments that performed strongly in one decade, may not do as well in the next.
• The asset class with the best performance changes from year to year and decade to decade. Trying to consistently pick the best performing asset is almost impossible, especially if emotions get involved. 
• Diversification spreads your investments between asset classes that perform differently. Potentially, strength in one asset class can offset weakness in another. 
• In down markets, diversification may help your portfolio lose less value than the market. In up markets, diversification can help your portfolio take part in market gains. 
• A look at long-term, rather than short-term, performance shows how diversification can help your portfolio navigate volatility and potentially get you closer to your goals.

Investments Should Align With Your Goals

• Over time, your focus as an investor likely shifts from growing your portfolio to preserving it.
• Consider aligning your asset allocation with your goals — equities for growth and bonds for income and risk mitigation.
• Determining how much money you should withdraw annually when retired is equally as important.
• A high withdrawal rate may mean that you outlive your savings.

Importance of Rebalancing

• The relative market performance of asset classes shifts over time, which may alter your portfolio’s mix of investments.
• For instance, if stocks outperform bonds, your allocation to stocks grows, potentially increasing risk. 
• Conversely, if bonds outperform stocks and your allocation to stocks shrinks, you may miss out on potential growth. 

Understanding Risk Is Critical
 

• While you can’t avoid risk, by understanding its nature, you may be able to manage it.
• Determining the risk in your portfolio may make the difference when pursuing your goals.
• One aspect to think about is how your asset manager tackles risk. At MFS, we’ve had a singular purpose since 1924: to put your money to work, responsibly. One of the ways we do that is through risk management.

Realize the Benefits of Working With a Professional

• A financial professional — who knows your goals, temperament for risk, time horizon and total holdings — could be your most valuable asset in any type of market environment.
• The financial professional can try to help avoid costly mistakes, and can allocate, diversify and rebalance your assets accordingly. 
• They can create the best possible financial strategy for pursuing your long-term financial goals. 

Summary

When volatility strikes, it’s hard to stay calm and focused on your long-term goals. Rather than bailing out of the market, strike back with a plan for investing with resilience.

■ Invest for the long term

■ Allocate, diversify and rebalance

■ Manage risk

■ Look for an asset manager that aligns with your goals

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Important Notes:

MFS may incorporate environmental, social, or governance (ESG) factors into its fundamental investment analysis and engagement activities when communicating with issuers. The examples provided above illustrate certain ways that MFS has historically incorporated ESG factors when analyzing or engaging with certain issuers but they are not intended to imply that favorable investment or engagement outcomes are guaranteed in all situations or in any individual situation. Engagements typically consist of a series of communications that are ongoing and often protracted, and may not necessarily result in changes to any issuer’s ESG-related practices. Issuer outcomes are based on many factors and favorable investment or engagement outcomes, including those described above, may be unrelated to MFS analysis or activities. The degree to which MFS incorporates ESG factors into investment analysis and engagement activities will vary by strategy, product, and asset class, and may also vary over time. Consequently, the examples above may not be representative of ESG factors used in the management of any investor’s portfolio. The information included above, as well as individual companies and/or securities mentioned, should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any MFS product.

As an active manager, please be advised that the companies named in this report may no longer be held by an MFS client at the time that this report is published.

The views expressed are those of the author(s) and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation to purchase any security or as a solicitation or investment advice from the Advisor.