The markets have been anything but calm lately. The impact of tariffs or potential tariff threats are causing uncertainty in the global economy resulting in sharp swings in both directions over the past few months. While short-term volatility can feel unsettling, it is important to remember that these mega fluctuations, although infrequent, are an expected part of investing.
Periods like this often test our patience and decision-making. However, with the right perspective and a disciplined approach, market volatility can be managed and even leveraged, to your long-term advantage.
Here are three key lessons that every investor should keep in mind during turbulent times:
1. Losses Only Crystalize When You Sell
It is natural to feel uneasy when your investment portfolio dips in value. However, remember: a drop in market prices does not equal a realized loss unless you sell your investments at a lower price than you paid.
Volatility is temporary. Selling in a panic during a downturn not only locks in losses—it also means missing out on potential rebounds. Staying invested, especially if your financial goals are long-term, gives your portfolio a chance to recover and grow.
Key takeaway: Do not let emotions drive your decisions. Unless you need the funds in the short term, avoid selling solely in reaction to market dips.
2. What We Can Learn from Market History
Looking back, the market has endured wars, recessions, pandemics, and political uncertainty. Despite all of that, it has shown a consistent ability to recover—and reward patient investors.
Consider the 2008 financial crisis or the sudden crash during the onset of COVID-19 in 2020. Both times, markets bounced back strongly. The common thread? Investors who stayed the course and avoided knee-jerk reactions were typically the ones who came out ahead.
While no one can predict exactly how or when the market will recover, history teaches us that downturns are often followed by periods of growth.
Key takeaway: Volatility is part of the journey. Trust in the market’s long-term resilience.
3. Establish a Financial Plan and Review Your Investments Regularly Financial Plans are Important
While we cannot control the markets, we can control how we respond to them. One of the most effective ways to stay calm and focused during turbulent times is by having a solid financial plan. Without a plan, it is easy to react emotionally to short-term market movements. However, a financial plan connects your assets to something far more meaningful: your personal goals. Also, remember that a financial plan is not just about investments. Other key strategies include:
• Establish an Emergency Fund – 3 to 6 months worth of living expenses
• Solid Cash Flow Management and Debt Reduction
• Financial Protection – through insurance products that make sense for your needs
• Ongoing Savings Plan – through payroll contributions or pre-authorized debit for various financial goals.
When volatility strikes, having a clear roadmap helps you zoom out from the day-to-day noise and focus on the bigger picture.
Review Your Investments Regularly
While staying invested is critical, it does not mean ignoring your portfolio entirely. Market volatility is a good reminder to check in—calmly and rationally—on your investment strategy.
Ask yourself:
• Are my investments still aligned with my goals and time horizon?
• Does my portfolio reflect my current risk tolerance?
• Is it time to rebalance to maintain a healthy asset allocation?
Reviewing your portfolio helps ensure that you are not overexposed to any one area and that your investments are still working toward your objectives. But remember, the goal is to make thoughtful, strategic adjustments—not reactive ones based on market fear.
Key takeaway: Use volatility as a checkpoint, not a trigger for rash decisions.
Final Thoughts
Market volatility can be unsettling, but it does not have to derail your long-term strategy. Establishing a financial plan, staying committed to your goals, trusting in the market’s long-term track record and making thoughtful investment choices can help you navigate short-term market turbulence with greater confidence.