When the market takes a dramatic dive or makes unexpected jumps, it’s natural to feel a flutter of panic. Should you sell everything? Buy more? Call your advisor in a state of alarm? Before you make any sudden moves, take a deep breath. Market volatility is not only normal – it’s an expected part of investing that savvy investors learn to navigate with confidence.

Market volatility simply refers to the rate at which prices rise and fall. High volatility means larger price swings in shorter periods – those heart-stopping moments when your portfolio value seems to be on a roller coaster. While these fluctuations can feel alarming, they're woven into the fabric of healthy markets.

Market volatility is an inherent characteristic of stock investments. The fluctuations in stock prices, while sometimes unnerving, are actually an important mechanism for having the opportunity to generate long-term wealth. Investors who can tolerate short-term market swings may be rewarded with greater financial growth over extended periods.

When markets get choppy, our brains often default to fight-or-flight mode. Investors who react emotionally to market swings typically underperform the market annually. Why? Because timing the market consistently is nearly impossible, even for professionals and seasoned investors.

Consider this as an example: Investing $10,000 in the S&P 500 index over a 20-year period ended December 31, 2024, and missing just the 10 best market days would have cut your returns nearly in half.¹ And ironically, the best days often follow closely behind the worst ones. Jumping ship when things turn awry often means missing the recovery.

This is precisely why having a thoughtful, personalized financial plan developed with a financial advisor can be incredibly helpful in pursuing your goals. A solid plan isn’t built for fair-weather investing; it strives to anticipate storms.

Your financial plan should reflect:

• Your specific goals and timeline
• Your personal risk tolerance
• Diversification strategies designed to help mitigate risk
• Rebalancing, as appropriate, to maintain your desired risk level

A well-designed financial plan should align with your goals while remaining adaptable to changing market conditions. The path may take detours, but the destination remains the same. The key is maintaining flexibility and a long-term perspective and understanding that temporary deviations do not prevent you from pursuing your intended objectives.

Not all market movements demand the same response. Here is when you should consider adjustments:

• When your life circumstances change significantly
• When your timeline for needing the money shifts
• When your goals evolve
• When your risk tolerance has genuinely changed (not just temporarily due to market fear)

Notice what’s not on this list? “When the market drops” or “When headlines predict doom.”

Disciplined Decision Making

The Takeaway