Headlines make noise, fundamentals create wealth

My news feed feels like a never-ending stream of "market-defining moments". Each day brings with it a new sensational headline – regular breakthroughs in AI, non-stop statements from a certain president, and endless speculation about what comes next. 

And with each headline comes a fresh round of market volatility. Just a few weeks ago, we saw how DeepSeek made waves. For investors watching, it might have felt like a pivotal moment. After all, if a start-up could challenge tech giants so fundamentally, shouldn't we be adjusting our portfolios? Shouldn't we be timing our exit before the next one comes along? Well, within a week, the markets had recovered.

We are living through remarkable times, that much is true, but as long-term investors, we have history to look back to. It's a story we've seen play out time and time again – though the characters may change. Last year, I wrote to you about how markets reward those who stay invested through turbulent times. That message still feels relevant today.

A new, but familiar story

Over the past three decades, we've seen the dot-com bubble, the Global Financial Crisis, the COVID-19 pandemic, and many other events that felt like fundamental shifts. Each time, there were compelling arguments for why "this one is different". Each time, there were seemingly rational reasons to try timing an exit and re-entry.

But when we zoom out, a familiar pattern emerges. Global markets have weathered crisis after crisis, demonstrating an almost stubborn resilience. In the pandemic crash of March 2020, the S&P 500 plunged more than 30% in a matter of weeks. Doom and gloom abound. Many, faced with unprecedented uncertainty, exited to cash – but those who stayed invested saw their portfolios recover and reach new highs within a year. Time in the market trumps timing the market.

Think about it this way: when you look at any historical chart of market returns, can you spot which dips were caused by which headlines? And what about the long-term trajectory? What you'll see instead is a steady upward march, powered not by news cycles but by the fundamentals: economic growth, population expansion, and technological innovation.

Here's what the data shows: if you had invested $100,000 in a broad market index in 1985 and simply stayed invested, letting compound interest work its magic, you'd have about $2.2 million today. No exits or re-entries required – just consistent participation in the market's efficiency.

The only free lunch in investing

While the ideal entry and exit points may be clear in hindsight, they're impossible to predict in real time. That's why a diversified portfolio tends to work better. When individual companies or sectors experience dramatic swings, diversification helps cushion the impact. Remember Nvidia’s drop when DeepSeek made the news? While the firm fell 17%, the broader tech-focused Nasdaq only moved down 3%.

This isn't just about managing your downside risk, it’s about making it easier to focus on your long-term investing strategy. When you know your portfolio is built to weather different market conditions, it’s easier to stay invested than react to the news. That’s crucial – in fact, missing only the 10 best days in the market would have cut your returns nearly in half.

What really matters for wealth creation

My point isn't that market movements don't matter, or that we should ignore significant developments. Rather, it's about understanding the difference between the random noise and real economic signals. While daily headlines can move markets in the short term, long-term wealth creation has historically come from staying invested through these cycles, and from capturing the fundamental growth drivers.

True wealth creation happens not in the day-to-day drama of the markets or politics, but in the patient accumulation of returns over time. That's a signal worth focusing on.