Managing Your Investments During Market Volatility

Since 1950, the S&P 500 has experienced an intra-year decline of at least 10% in roughly one out of every three years. Corrections of 5% or more happen almost annually. Yet despite this, the market has delivered positive annual returns in approximately 73% of calendar years. The data tells a clear story: downturns are normal, and the long-term trend has been upward. The challenge is not knowing this intellectually; it is acting on it when your portfolio is declining and the headlines are alarming.

Why Emotional Decisions Are Costly

Research from Dalbar consistently shows that the average equity investor underperforms the market by 3-4% per year, largely due to poor timing decisions. Selling during downturns locks in losses and creates a second problem: you then have to decide when to get back in. Most investors who sell during a panic miss the recovery, which often happens quickly and without warning. Six of the ten best single-day returns in market history occurred within two weeks of the ten worst days.

Practical Steps During Volatile Markets

• Review your financial plan and confirm your time horizon has not changed
• Rebalance into the decline — if stocks have fallen, your allocation may be underweight equities relative to your target
• Harvest tax losses — downturns create opportunities to offset gains and reduce your tax bill
• Avoid checking your portfolio daily — increased monitoring leads to increased anxiety and reactive trading
• Maintain adequate cash reserves so you are not forced to sell investments to cover near-term expenses

Volatility as Opportunity

If you are still accumulating wealth, market declines mean you are buying at lower prices. Dollar-cost averaging through a downturn is one of the most reliable long-term wealth-building strategies. At Rice Wealth Management Group, we view volatility not as a reason to abandon a plan but as a natural feature of markets that disciplined investors can use to their advantage.