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The timing of this article is influenced by U.S. President Donald Trump’s introduction of tariffs, which caused significant stock market volatility. During some trading days, investors lost significant amounts of money.

Stocks can decline in value and make them a high-risk investment. Because of this, investors require a greater potential return to invest in them.

The average annual return of stocks, as measured by the S&P 500, has been more than 10 per cent annually during the last 100 years. That is a very attractive return.

Every time stock markets have declined in the past, they eventually recovered their value in full. This means stock market losses have been short-lived — they do rebound.

If you are an investor, the second risk to be mindful of is you. Sometimes investors panic after a stock market decline in value and sell their stocks. If you believe the long history that markets will recover after declines in value, then you could interpret the motivation to sell as a mistake.

Stock markets do recover. However, if you’re investing in individual stocks, there is no assurance a recovery in value will happen. Maybe they will not recover. That is why my recommendation is to invest in a highly diversified portfolio and not just rely on a few specific stocks.

In many cases, when an investor sells their stock investments because of a potentially temporary decline in value, it is a mistake.