Why market dips are perfectly normal in investing

If you invested in 2024, the return will most likely put a big smile on your face. However, 2025 could look very different. After all, the stock market is subject to fluctuations. As investors, we have almost become accustomed to the fine upward trend of last year, but it is time for a little nuance. Suppose the stock market takes a nosedive this year: what should you do? Don't panic, in any case, because a small loss due to a stock market dip is completely normal. In this blog we will explain how that works.

You actually need fluctuations on the stock market

As an investor, it's good to understand the following mechanism. Investing and price fluctuations are intrinsically linked. Price fluctuations create market dynamics: the game of supply and demand. You actually need value swings to ensure buying and selling. In fact, without these fluctuations there would be no capital market (the market where stocks and bonds are traded). And therefore, there would be no return.

Investing is about perseverance. In the long term, the market has always risen, but never in a straight line. If you want to see what such a line looks like, take a glance at the S&P500 index over the past 58 years. You can clearly see how the line fluctuates along the way, but climbs considerably over a longer period of time.

Minimise risk by diversifying your investments

When you invest with Peaks, you invest in parts of various stocks and bonds on markets all over the world. By diversifying, your chances of achieving a good return increase and you also spread the risk of your investments. With Peaks, you follow the global economy, which has always grown until now. Even in a severe economic crisis, it's very unlikely that all the companies and countries you invest in will go bankrupt. That's why you are much less likely to lose all your money with diversified investments than with an investment in shares of a single company.

Worth knowing when the stock market fluctuates:

• Don't let news about a market dip get you down.
• Stay calm during short price fluctuations and hang in there.
• History has shown that the global economy (which you follow when you invest with Peaks) has always grown until now.
• Remember that you invest for the long-term and that the peaks and valleys along the way are just moments in time. In the end, it's about your results over a longer period.

Predicting what the stock market will do is like reading tea leaves

Nobody knows what the stock market will look like in 2025 or what return a particular index fund will generate. It's all guesswork. If you stay calm, are persistent and invest regularly and in a diversified way, there's a good chance that your investment will pay off in ten years. Historically speaking, that's how it has always worked out.