Ask an Advisor: What’s the Best Investment Strategy for Uncertain and Unpredictable Markets?

This is such a fun question. It comes up all the time, but if a silver bullet answer existed, our lives would look dramatically different and our bank accounts would, too.

At its core, this is a question about protecting against downside volatility while still participating on the upside. That’s what makes it so interesting: uncertainty tends to make action feel necessary. When markets feel volatile, the natural impulse is to assume something needs to change, both urgently and at scale.

A financial advisor can help you navigate markets and create an investment strategy that takes your financial situation into account. Connect with an advisor for free.

The challenge is that emotional responses like this rarely drive investment success. In periods of heightened uncertainty, we fall victim to focusing on “the trades” instead of “the investments.” We begin thinking in terms of days and weeks rather than years and decades. History shows that this short-term mindset can be costly.

In reality, no investment strategy perfectly limits downside while fully capturing upside. But we can rely on a set of principles that have consistently helped investors navigate uncertainty successfully over time. In my opinion, these lay the foundation for the optimal answer to your question.

Volatility Is Normal, But Emotional Decisions Can Be Costly

One of the most important truisms investors must acknowledge is that volatility is perfectly normal. It is a feature of investing that we should harness and view as an opportunity, not a bug that we must avoid and see as a detriment to success.

One commonly cited market-history chart compares each year’s S&P 500 return with the index’s largest decline at any point during that same year. According to J.P. Morgan Asset Management, from 1980 through 2025, the S&P 500’s average intra-year decline was 14.2%, meaning the index typically fell about that much from a high point to a low point during the year. Even so, annual returns were positive in 35 of those 46 years. ¹

Unfortunately, many investors interpret short-term declines as signals to abandon their strategy altogether. This helps explain why, according to J.P. Morgan’s research, the average investor has historically underperformed the S&P 500 by about 6% over the long term. Why such a wide gap? Most investors operate on emotions in response to headlines and gut feelings. This causes buying after runups have already occurred, and selling after declines are fully baked. Naturally, this materially reduces long-term returns.

Hartford Funds’ research on market timing tells a similar story. Over the past 20 years, a $10,000 investment in the S&P 500 would have grown to more than $190,000 if it stayed fully invested. But missing just the 10 best days would have reduced the ending value to about $85,000. Missing the 20 best days would have left roughly $50,000, and missing the 30 best days would have left only about $30,000. ³

As the saying goes, time in the market beats timing the market.

What makes timing even more difficult is that many of the strongest days occur immediately after sharp declines, when fear reaches the extremes and many investors have already moved to cash. This is why it can be so costly to avoid drawdowns: you’re probably already too late, and you’re probably going to miss the rebound.

Recent events provide good examples. Following the “Liberation Day” tariff announcements last year, markets corrected meaningfully in the immediate aftermath. But within a few weeks, they had fully recovered despite continued negative headlines and economic forecasts. Similarly, after the onset of the war with Iran in March 2026, markets fully recovered within about six weeks. In both cases, investors who reacted emotionally risked missing the recovery.

The lesson is that markets tend to respond before headlines improve, which is why successfully timing both the exit and re-entry is extraordinarily difficult.

(And if you need help creating a long-term investment strategy, consider working with a financial advisor.)

No Single Investment Works in Every Environment

Another common misconception is that there could be one “best” investment for uncertain markets. Traditional “safe haven” assets, such as gold or U.S. Treasuries, might come to mind. But as we alluded to, these are not silver bullets. Different environments inherently have different drivers, which by extension means different types of investments may lead. Flocking to these safe havens simply due to blanket uncertainty can have significant opportunity cost.

Annual returns by asset class illustrate this clearly. The best-performing asset class changes from year to year, since the drivers of returns ebb and flow.

Large-cap growth stocks led in 2023 and 2024 amid the burgeoning AI opportunity. While they remained strong in 2025, emerging markets and developed international equities led as the dollar weakened and other non-U.S. dynamics took effect. Year to date in 2026, commodities have led due to the Iran conflict. They were the worst-performing asset class in 2023 and middle of the pack in 2024 and 2025. Different years, different drivers, different leaders and laggards.

While diversified investors probably won’t find themselves at the top of the leaderboard, they probably won’t be at the bottom, either.

This is why diversification remains so important. Harry Markowitz famously said “diversification is the only free lunch in investing” because it helps reduce portfolio risk without completely or even necessarily sacrificing long-term return potential. Rather than trying to predict exactly which asset class will outperform next, diversified investors often remain better prepared for a range of outcomes.

(Unsure of how to build a diversified portfolio? Speak with a financial advisor and see how they can help you select and manage your investments.)

Taking a Disciplined, Long-Term Approach

For most of us, an effective strategy for addressing uncertain markets starts with our long-term goals, not short-term headlines. Most of us are not investing to maximize returns over the next few months. We are investing to grow assets during our working years, fund retirement, support future generations or give to causes we care about. Those are personal, long-term objectives, not goals that depend on outperforming over the next few weeks.

With our goals clearly defined, we can build a diversified strategic asset allocation aligned with our time horizon, liquidity needs and risk tolerance. That allocation should be designed with the understanding that volatility itself is inevitable. And as some of the earlier data indicates, volatility can be a powerful driver of long-term growth. Use that to your advantage and let it compound over time.

Importantly, this does not mean investors should ignore changing market conditions entirely. Tactical adjustments can play a role. But there is a major difference between making measured adjustments and abandoning a long-term investment plan altogether. Going all “risk-on” or all “risk-off” is rarely the right answer because, once again, success requires getting two separate and highly improbable decisions exactly right: when to exit and when to re-enter.

That is why disciplined investors so often outperform emotional ones over time. While uncertainty will always exist, successful investing is less about predicting every market move and more about maintaining a sound process, behavioral discipline and a focus on long-term goals through changing conditions.

(And if you need help selecting or adjusting your asset allocation, this free matching tool can connect you with fiduciary financial advisors.)

Putting It All Together

There is no perfect investment strategy for uncertain markets. Winners and losers change constantly with the drivers of markets. This naturally causes short-term volatility that should be accepted as normal and used to our advantage as long-term investors.

We cannot control volatility, but we can control our process and our response. That means defining clear long-term goals, maintaining appropriate diversification and staying invested according to a plan, even when market conditions shift. Over time, that discipline can help us manage uncertainty without losing sight of our personal objectives.

Investing Tips

• If you need help aligning your investment strategies with your needs, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Rebalance with rules, not reactions. Decide in advance when you will rebalance, such as after a target asset allocation drifts by a certain percentage. This can help you buy into weakness or trim strength without letting short-term market moves dictate every decision.

Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Jeremy Suschak, CFP®, is a SmartAsset financial planning columnist who answers reader questions on personal finance topics. Jeremy is a financial advisor and head of business development at DBR & Co. He has been compensated for this article. Additional resources from the author can be found at dbroot.com. Please note that Jeremy is not a participant in SmartAsset AMP and is not an employee of SmartAsset.

Photo credit: ©iStock.com/Photo courtesy of Jeremy Suschak, ©iStock.com/Nutthaseth Vanchaichana, ©iStock.com/seb_ra