When speaking with our clients, we hear a common question asked by even our most seasoned investors, “What changes do I need to make to my investment strategy during periods of market volatility?”
Recent market events, including the April 2025 announcement of new tariffs which triggered a 1,400-point drop in the Dow Jones Industrial Average, remind us that volatility remains a regular feature of healthy markets.
We understand why this question is so often top of mind—especially for those of you who own concentrated positions of equities in your portfolio. Current events such as legislative actions in Congress, the pandemic, and the rapidly-changing economy all have had an impact on your portfolio.
While certainly a complex question, we leverage our decades of investment management experience to give a simple and confident answer.
During periods of market volatility, always maintain focus on the long-term view of your portfolio.
Before we discuss why we endorse this philosophy and what you can do to preserve your long-term strategy despite volatility in the market, let’s quickly define volatility and discuss why it happens in the first place.
What exactly is market volatility?
Market volatility can be defined as a spectrum or range of price change security experiences over a given period of time.
Source: Fidelity Investments.
Essentially, volatility refers to how much a security or stock price is changing during a certain time frame. Low volatility generally means stability and consistency, while high volatility is a result of extreme price fluctuation, both up and down.
It’s not surprising that these peaks and valleys make investors uneasy, especially when they occur so erratically.
Why does market volatility happen?
Uncertainty is a big driver of volatility. National and global events, pending legislation, and economic instability are just some of the factors that make investments fluctuate. Factors like inflation concerns, interest rate adjustments, geopolitical tensions, and tariff policies have all contributed to market uncertainty in recent years.
The occurrence of volatility is quite predictable when you consider all of the vast changes happening in today’s economy and society. On average, the market goes through about one pullback of <5% each year, and one correction every few years. A correction is categorized as more than a 10% drop in the market, and is aptly named correction because historically the drop often "corrects" and returns prices to their longer-term trend. Since 2000, the market has had 13 corrections. (Source: Based on information from Charles Schwab, 'Market Correction: What Does It Mean?', March 2025.)
Many investors think that when the market behaves this way, they should take action, move their investments, or otherwise reconsider their strategy. Conversely, we maintain that investors should remain patient and disciplined during these instances. Even if short-term gains could be made by selling, we advise our clients to focus on the long-term.
Why do we advise our clients to focus on the long-term?
Historically, periods of volatility are followed by periods of positive performance. If you are quick to react, and you sell shortly after the market drops, you can miss the critical opportunity to make gains when it bounces back.
Volatile periods are cyclical, and past trends indicate that positive trading days frequently happen shortly after negative ones. By remaining disciplined and focused on the long-term, you can ride out the lows and capitalize on the future highs down the road.
For example, consider how the market bounced back over the following 12 months after each of the below events:
Source: Morningstar as of 2/28/20. Returns are principal only not including dividends. U.S. stocks represented by the S&P 500 Index.
Past performance does not guarantee or indicate future results. Index performance is for illustrative purposes only. You can’t invest directly in an index.
Whether it was the Financial Crisis of 2007-2009, or the Trade War from 2018 which involved tariffs, the S&P’s major decline bounced back over the following year, oftentimes resulting in greater gains than losses.
As an example, if you would have invested $100,000 on October 4, 2018, the beginning of the Trade War S&P decline, the investment value would have increased to $137,000 by the end of 2019.
With that in mind, what can you do to manage volatility?
We have three recommended strategies to take during these periods of uncertainty.
- Gain perspective.
- Continue investing.
- Trust the process, and the professionals.
Top 3 ways to manage volatility
1. Gain perspective.
Periods of volatility have happened before, and they will happen again. There’s no evidence that offloading your investments as a reaction to poor-performing days is worth it in the long run. In fact, some of the biggest market rallies have followed some of the biggest market corrections:
Source: Fidelity Investments.
The chart above shows that markets have always experienced significant swings - both up and down - while maintaining a long-term upward trajectory. This helps us to see that that volatility is normal and expected.
When investors react to volatility by offloading investments during downturns, they risk missing the strongest recovery days. The chart below shows how costly this can be:
Sources: BlackRock; Bloomberg. Stocks are represented by the S&P 500 Index, an unmanaged index that is generally considered representative of the U.S. stock market.
Past performance is no guarantee of future results. It is not possible to invest directly in an index.
Avoid making any rash decisions. Instead, stay disciplined and you will benefit in the long run.
2. Continue investing.
Not only should you be patient with where your money is now, continue the course and invest more, if financially possible for you.
If you typically invest a certain percentage of your income every month, continue to do so, even when the market is volatile. Dollar-cost averaging can be particularly effective during volatile markets, as shown in the chart below.
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Consider historical trends, not just the current state. If you’re too conservative, and you pull back on your typical contributions, you risk missing the big gains that will occur when the market bounces back.
For those with excess cash reserves, market dips can bring attractive buying opportunities. On the other hand, if you're in need of cash, it may make sense to consider more liquid investments before tapping into retirement accounts, as that can trigger tax penalties and reduce your long-term growth potential. Dollar-cost averaging, as shown in the chart above, allows you to benefit from market fluctuations by systematically investing regardless of market conditions.
Instead of dipping into retirement focused accounts, consider the liquidity of your other investments. Liquidity refers to how quickly an investment can be accessed or “converted” into cash. Depending on the investment vehicle, funds operate on a spectrum from low to high liquidity and flexibility. Investment vehicles such as Exchange Traded Funds, or ETFs, actually function like a stock with trades executed real-time, offering investors high liquidity and flexibility. If you are interested in discussing a strategy for having high liquidity for your investments, reach out to a financial advisor professional.
If financially possible, we always recommend staying the course and even investing more, as volatility is bound to level off.
3. Trust the process, and the professionals.
There is a reason you agreed to your current investment strategy and why you trust your wealth manager with your money. It’s an ongoing process—one that will have ups and downs—and you need to trust it in order to get the biggest gains.
At MA Private Wealth, our investment approach is built on three pillars: intellect, design, and execution that guides how we navigate market volatility. We are trained to know the nuances in the market and where you can benefit from small tweaks, without shifting your entire strategy. We pride ourselves in taking this responsibility on for our clients.
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Let’s revisit the original question asked by many clients: “Should I keep investing even through times of market volatility?”
Our short answer is: Yes!
Gain perspective, continue investing, and trust that our team will make any necessary moves for you.
