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The Cost of Sitting This One Out
Hoxton Blog • The Cost of Sitting This One Out
In the space of two weeks, chip and AI-related shares fell hard, then rallied almost as quickly.
React to the first move by selling on the way down, then wait for things to calm down before buying back in, and there is a good chance you get the timing wrong twice.
But this is not really a story about chips. It is a story about what it can cost to wait for the kind of certainty markets rarely give you.
A Round Trip in Two Weeks
At the end of July, semiconductor shares were falling sharply.
The VanEck Semiconductor ETF tracks many of the chipmakers at the centre of the AI investment boom.
At its lowest point, it had fallen almost 14% from its late-July level as investors questioned whether the enormous sums being spent on AI infrastructure could continue to deliver the expected returns.
Intel, Micron and AMD were among the companies marked down sharply, and the sell-off spread to Asian semiconductor stocks.
At the time, the reasons sounded compelling. Was AI spending peaking sooner than expected? Could ever-higher infrastructure and equipment costs put pressure on margins? Had the AI trade simply gone too far, too quickly?
For a few days, the prevailing story was that the boom was beginning to unwind.
Source: YCharts. Past performance is not indicative of future results.
Then the story changed.
Strong earnings from companies exposed to AI helped send many of the same shares sharply higher. By this week, the fund that had been down almost 14% was showing a much smaller loss of 2.6%. Chipmakers had also recorded their strongest four-day run since 2020.
The narrative had changed dramatically. The underlying long-term questions had not disappeared overnight.
That distinction matters.
The All-Clear Usually Comes Too Late
Here is the problem with waiting for certainty.
The point at which the semiconductor sell-off looked most convincingly like a genuine unwind was close to the low. By the time strong earnings arrived, and the headlines became more reassuring, much of the recovery had already happened.
This pattern is not unique to semiconductor stocks. Markets move as expectations change, often before investors have the comfort of knowing exactly how the story will play out.
That creates a difficult trap. You sell because the news feels bad. Then you tell yourself you will get back in when things look better. But by the time they do look better, prices may already have moved.
Selling stops the immediate discomfort. Waiting for the all-clear feels prudent. Neither guarantees a better investment outcome, and both introduce another decision you have to get right: when to get back in.
That is much harder than it sounds.
The Bigger Cost of Waiting
A two-week swing in one sector is a small-scale example of a much bigger investing problem: sitting on the sidelines while waiting for a better time to invest.
Zoom out and the consequences become much clearer.
Source: Exhibit A, FactSet Research Systems Inc., Standard & Poor’s, data to 5 August 2026. Figures are hypothetical and shown for illustrative purposes only. This is not a recommendation. Past performance is not indicative of future results.
Since 1950, $100 invested in the S&P 500 would have grown to the equivalent of approximately $3,321 after inflation, based on the data shown above. The purchasing power of the same $100 held as cash earning no return would have fallen to around $7.
That does not mean cash has no place in a financial plan. It absolutely does. Cash can provide liquidity, fund short-term spending and give you a buffer when life does something unexpected.
But cash and long-term investment capital have different jobs.
Holding money intended for long-term growth in cash indefinitely because you are waiting for a more comfortable entry point creates a different kind of risk. It is quieter than a market fall, but over time inflation and missed market returns can make it expensive.
Downturns Are the Toll, Not the Exit
None of this means market downturns should be dismissed. They can be painful, prolonged and, at the time, genuinely frightening.
They are also part of investing.
Look at the history of the S&P 500 since 1928 and you see the Great Depression, the dot-com bust, the global financial crisis and many other periods of severe market stress. Each came with its own reasons to believe that this time might be different.
Source: Exhibit A, FactSet Research Systems Inc., Standard & Poor’s, data to 5 August 2026. Past performance is not indicative of future results.
Historically, the US equity market has recovered from major downturns and subsequently reached new highs, although the timing and scale of those recoveries have varied considerably. That history cannot tell us what markets will do next, and it certainly cannot promise that every future decline will be followed by a quick recovery.
What it does show is that significant declines have occurred repeatedly alongside substantial long-term market growth.
That is the trade-off investors need to understand. You do not get the long-term return of equities without accepting periods when owning them feels uncomfortable.
The downturn is part of the journey, not necessarily a signal to abandon it.
What This Means for You
A well-built portfolio is not designed around correctly predicting which week semiconductor shares will fall 14%, or when they will suddenly stage their strongest rally in years.
It is designed so that one sector, one headline or one difficult week does not determine whether your financial plan succeeds.
That is what diversification is for.
Discipline during periods like this is not about pretending volatility does not matter. Nor is it about predicting what happens next.
It is about understanding the difference between a market move that genuinely changes your financial plan and one that simply makes you uncomfortable for a few days.
If your goals, time horizon, risk tolerance and circumstances have not changed, a dramatic headline does not automatically mean your portfolio should.
Investors who move in and out of markets take on an additional risk: they have to make two successful timing decisions rather than one. They need to know when to sell, and they need to know when to return.
Investors who remain invested do not have to make that second call and, as this recent semiconductor reversal illustrates, recoveries can begin before the news feels reassuring.
The cost of sitting on the sidelines is rarely obvious at the time. You do not receive a statement showing the returns you missed. You only see the effect later, in the gap between what your money achieved and what it might have achieved had you remained invested.
Good long-term financial planning is designed to reduce the temptation to make those decisions in response to short-term noise. It gives you a plan for the difficult weeks before those difficult weeks arrive.
If recent market moves have left you wondering whether your portfolio is positioned appropriately for your long-term goals, speak to the team at Hoxton Wealth.
You can contact us at client.services@hoxtonwealth.com or via WhatsApp on +44 7384 100200 to discuss your financial plan and whether it still reflects the future you are working towards.
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