Handling Market Volatility: Why Your Portfolio Is Built for What Comes Next
Fixing the Roof While the Sun Is Shining
You open your investment app. Lately, you’ve likely seen green numbers and steady growth. It feels good to see account balances rise, and it is easy to feel confident when the wind is at your back.
However, experienced investors know that the best time to think about a storm is when the sun is shining. While we are currently enjoying a period of relative calm and positive returns, we know that markets are cyclical. Volatility—those inevitable ups and downs—can return quickly, often without warning. The good news? You don’t need to predict when the tide will turn because your financial plan was already designed to handle it.
Why Markets Are Bumpy by Design
We often fall into the trap of thinking that when markets go up, they are "working," and when they go down, they are "broken." In reality, volatility is a feature, not a bug—even if we haven't seen much of it recently.
According to the Efficient Market Hypothesis, prices change constantly because millions of investors are processing new information every second. Right now, that information has been largely positive. But eventually, new data—inflation reports, geopolitical shifts, or earnings surprises—will arrive.
If we want the long-term "premium" that stocks offer over cash, we must be willing to pay the "admission fee," which is volatility. History provides our evidence here: markets do not move in a straight line. Downturns are temporary, but they are also normal, expected parts of the journey.
How Your Portfolio Is Built for This
We do not rely on crystal balls to guess when the current run will end. We don't chase "star managers" who claim they can time the top. Instead, we rely on Modern Portfolio Theory and disciplined structure. Your portfolio is built to be resilient:
Diversification is your shock absorber: You aren't "all in" on the recent winners. By spreading investments across different asset classes and geographies, we ensure that when the current leaders eventually stumble, the rest of your portfolio is there to balance it out.
Systematic Rebalancing: In times like these, when stocks rise, they become a larger percentage of your portfolio. We discipline ourselves to trim what has grown (selling high) to replenish more stable assets (buying low). This protects your gains without requiring us to predict the future.
Risk/Reward Alignment: We aligned your portfolio with your goals before the volatility arrives. If you need money soon, it isn’t exposed to stock market swings. If your horizon is long-term, future dips are just noise, not risk.
What You Should Do (And Not Do)
As your advisor, I act as a behavioral coach to help you navigate not just fear, but also complacency and recency bias—the dangerous assumption that the recent good times will last forever.
To stay on track:
The "Do" List:
- Do enjoy the growth, but remember it serves a long-term purpose (retirement, legacy), not short-term spending.
- Do stick to the agreed-upon rebalancing plan. It might feel counterintuitive to sell winners, but it is essential for risk control.
- Do reach out if your goals have changed.
The "Don't" List:
- Don't anchor your expectations on recent highs. 15-20% returns are not the historical average.
- Don't get greedy. The urge to take on more risk often peaks right before a market correction.
- Don't panic when the volatility eventually returns. It is part of the math.
We Are Prepared
The markets have been kind recently, but we are not naive. We know that volatility is the price we pay for long-term growth. Your portfolio is engineered to withstand the inevitable storms, and our partnership is designed to keep you disciplined—whether the arrows are green or red.
We are here to help you look past the headlines and stay focused on the horizon.
Next Step
Would you like to schedule a brief 15-minute "check-in" to review your gains and ensure your risk level is still appropriate for the year ahead?
Click here to schedule your 15-minute Retirement Fit Call.
Let's make sure your retirement journey is as secure and fulfilling as you envision.
