How to Stay Disciplined During Market Volatility

Melissa Kolcz |

If we are not in a bear market yet, we're getting pretty close. The definition is a 20% downturn or more over at least a two-month period of time.

There is nothing pleasant about a bear market—not the anxieties they cause, not the paper losses, not the relentless drip, drip, drip of reports in the media about this or that daily downturn. The gut instinct is to stem the losses by selling before the market goes down further, but locking in losses after the fact has, historically, almost always been the wrong move. Nevertheless, many people do it, and sell to wiser investors who prefer buying their investments on sale.

There is a saying on Wall Street to the effect that, during bear markets, investments tend to return to their rightful owners.  

What is often lost in the market punditry and gloomy daily reports is how common bear markets have actually been in market history. Since 1929, there have been 28 downturns that met the technical definition of a bear market, or roughly one every 3.3 years. The 2007-8 downturn was a whopper; the markets lost just under 52% of their value before roaring back into one of the greatest, most intense bull markets in history. The short Covid-related downturn in 2020 was one of the quickest, lasting just 33 days before recovery.

Perhaps the hardest part of these sharp market declines is staying disciplined. We remind you that volatility brings opportunities and said volatility can make you money. However we understand that downturns aren’t fun, and in some cases they directly contradict what your emotions might be telling you to do. We remind you that we make investment decisions based on fundamentals and we do not allow emotions to drive financial decisions. 

We appreciate your continued trust in our team and we welcome you to reach out should you have any concerns.

With gratitude,

Your Team at Beacon Financial Planning