The capital market, particularly in a country like Israel, can be highly volatile. A security incident, or even regional tensions, can trigger declines in certain indices or asset classes, seemingly signaling increased risk. As a result, many savers react with concern and choose to move investments out of higher-risk assets and into more conservative ones.
On the surface, this may appear to be a rational step. But especially in recent years, the opposite has often proved true: following security-related or crisis events, markets tend to recover, and those who remain patient are often the ones who benefit.
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After security or crisis-driven shocks, markets often recover, and patient investors are usually best positioned to benefit
This pattern recurs consistently and is worth noting. Not every immediate 2% decline in an index constitutes a sharp movement that justifies action in an investment portfolio or pension savings. It is important to remember that in investing, particularly over the long term, a period of a few months does not necessarily have a material impact, and corrections often follow.
Naturally, each case should be assessed individually, especially when it comes to pension savings. The purpose of the investment, the investor’s stage of life, whether they are approaching retirement or are younger savers building capital, and other considerations must all be taken into account.
That said, from a general perspective, acting out of panic is ill-advised. It can prove costly and lead to missed opportunities for meaningful capital accumulation. Money invested over time builds momentum, and sudden withdrawals can undermine that process.
The COVID effect
One of the clearest examples in modern financial history is the COVID-19 pandemic. In March 2020, markets collapsed at one of the fastest rates ever recorded. Anyone who opened their investment portfolio at the time saw red figures that looked catastrophic. Millions of investors fled to deposits, bonds and anything perceived as stable.
Yet within less than a year, the S&P 500 had not only recovered, it had reached new highs. Those who exited in panic did not benefit from the rally.
This is neither coincidental nor surprising, even on a global scale. After the September 11 attacks, markets plunged sharply, but within two years had begun a prolonged recovery. Following the 2008 financial crisis, which in real time looked like a collapse of the global economic order, a decade of unprecedented gains followed.
The pattern repeats itself with remarkable consistency: the crisis appears extreme, and then comes the recovery phase, often before most people even notice it is already underway.
It’s not the war, it’s us
Psychological research repeatedly shows that people experience the pain of loss at roughly twice the intensity of the pleasure derived from an equivalent gain. In investment terms, this means that a call to an adviser after a 2% decline is far more common than quiet satisfaction after a 10% increase.
Pain speaks; calm remains silent. And it is from this pain that decisions are made, decisions whose cost can amount to tens of thousands of shekels over time.
During periods of uncertainty, whether driven by war, economic volatility or geopolitical tensions, emotional stimuli peak. Headlines are alarming, conversations at home grow heavier and a sense of lost control sets in. It is precisely at this point, when emotions are at their highest, that people are most prone to making financial decisions that, in hindsight, prove costly.
So what should be done?
The right approach is not to avoid action altogether, but to differentiate between types of decisions and assess each case according to the needs, goals and characteristics of every saver or investor.
Those with low risk tolerance, due to older age, a short investment horizon, a need for liquidity or other considerations, may indeed need to review their portfolio composition. However, this should not be driven by the morning’s headlines. It is a structural question that must remain detached from short-term developments.
By contrast, those in a long-term wealth-building phase, looking 10 to 20 years ahead, should maintain perspective. An interim period, even one marked by difficulty and uncertainty, is statistical noise rather than a defining event.
Perhaps the most practical step in such times is to stop checking one’s portfolio too frequently, not as a form of denial, but as a financial strategy. Daily monitoring during periods of volatility can create emotional triggers that lead to action, which is not necessarily the right course for every investor.
Strategy, not sentiment
Israel is a country that operates under near-constant security tension. Yet overall, the shekel tends to remain stable, the Israeli capital market has delivered solid performance even during periods of heightened tension and, most importantly, risk is often priced in ahead of time.
This is precisely why, when the security situation stabilizes, markets tend to react sharply. Those who exited before stabilization miss the initial phase of recovery. It has happened before, and it will happen again.
It is perfectly reasonable to be attentive to one’s instincts. Ultimately, however, decisions should be guided by strategy, not sentiment.
Maor Eliassi is the CEO and Founder of Orient Insurance Agency