Every few years, markets remind us that they are not a straight line. A geopolitical event, an inflation surprise, a tariff announcement, a banking scare…and the headlines turn red. Your portfolio statement looks worse than it did last month. Somewhere in the back of your mind, a question forms: should I do something?

For East Tennessee families approaching or already in retirement, that question carries real weight. Market volatility feels different when you are no longer working and your portfolio is your paycheck. The temptation to act, to sell, to move to cash, to do something, can be enormous.

But here is what decades of market history tell us: the way you react to volatility matters far more than the volatility itself. The investors who do well over time tend to share one trait. They avoid the costly reactions that downturns provoke, even when they cannot avoid the downturns themselves.

Market downturns are normal, and so are recoveries

Before talking about how to react, it helps to put market volatility in perspective.

According to Ned Davis Research, there have been 27 bear markets in the S&P 500 since 1928, defined as declines of 20% or more from a recent peak. There have also been 28 bull markets. Stocks have risen over the long term despite every recession, war, pandemic, and financial crisis along the way.

Bear markets tend to be relatively short. The average length of a bear market is 289 days, or about 9.6 months, significantly shorter than the average bull market of 988 days, or 2.7 years. Markets have been on the rise approximately 78% of the time over the past 95 years.

Even the most painful downturns recover. The S&P 500 dropped 49% during the dot-com bust starting in 2000 and took roughly 31 months to recover. The 2020 COVID crash was sharper, with the S&P 500 cratering by more than 30% in just 33 trading days, and yet it fully recovered within four months. 

Volatility is a sign that the markets are working as designed. The challenge is not eliminating it. The challenge is not letting it derail your plan.

The three costliest reactions to volatility

Most of the damage investors do to themselves during volatile periods comes from three reactions. Understanding what they are makes them easier to avoid.

1. Selling out of fear. When markets drop, the instinct to “stop the bleeding” by selling and moving to cash is powerful. The problem is what happens next. Investors who sell during a downturn lock in their losses and then face the equally difficult question of when to get back in. Most never time it correctly. Research from Hartford Funds found that approximately 42% of the S&P 500’s strongest days over the past 20 years occurred during bear markets. Another 36% of the best days happened in the first two months of a new bull market, before it was clear a bull market had even begun. Selling out of fear often means missing exactly the days that drive long-term returns. 

2. Trying to time the bottom. Investors who avoid selling sometimes still try to be “smart” about volatility by pulling money out and planning to put it back in when markets feel safer. This sounds disciplined but rarely works. Markets do not signal a bottom in advance. By the time it feels safe to invest again, much of the recovery has typically already happened.

3. Checking your portfolio too often. This is the easiest mistake to overlook and one of the most damaging. Constantly watching your account balance during volatile markets amplifies anxiety and increases the likelihood of an emotional decision. Behavioral research consistently shows that frequent portfolio monitoring leads to worse outcomes for long-term investors.

What to do instead

Reacting well to volatility comes down to a few principles that sound simple but require discipline.

Stay focused on your long-term plan. The reason you built a retirement plan was to weather periods like this without changing course. Revisit the assumptions behind your plan rather than the daily movement of your portfolio. If the assumptions still hold, the plan still holds.

Rebalance, don’t react. Volatility often pushes portfolios out of their target allocation. Rebalancing, which involves selling what has held up and buying what has dropped, is a disciplined way of doing the opposite of what most investors do. It buys low and sells high, on autopilot.

Use volatility to your advantage if you are still saving. Dollar-cost averaging into a falling market means buying more shares with the same dollars. For mid-career investors still contributing to retirement accounts, volatility can actually improve long-term returns over time.

Check less often. A weekly or monthly review is plenty for most investors. Daily checks during downturns rarely improve outcomes and often hurt them. The market is doing what it is supposed to do. Let it.

Have a conversation, not a transaction. If volatility is making you anxious, the most useful thing you can do is talk to a fiduciary advisor who knows your full financial picture. The right response to a market downturn depends on your timeline, your withdrawal needs, your other income sources, and your goals. It rarely looks like the response financial news would suggest.

How a fee-only fiduciary advisor helps

A good financial advisor’s job during volatile periods is to provide perspective, not predictions. No one can tell you what the market will do next week. What a fiduciary advisor can do is hold you to the plan you built when markets were calm, and help you make adjustments that reflect your goals rather than your emotions.

At Roan Capital Partners, we operate on a fee-only model, which means our recommendations are driven by what is best for your financial plan, not by what generates a commission. That distinction matters most in periods of volatility, when the temptation to recommend products that “protect” you against market risk can be strongest among advisors with commission-based incentives.

For families across Johnson City, Oak Ridge, and Crossville, our role during volatile markets is the same as our role during calm ones: to help you make decisions that match the long-term plan we built together, not the short-term mood of the news cycle.

The bottom line

Markets will go down. Sometimes sharply. Sometimes for longer than feels comfortable. That has always been true, and it always will be.

What is not inevitable is how you react. The investors who do well over decades share a habit. They stay focused on their plan, ignore most of the noise, and have a trusted advisor to call when the headlines feel overwhelming.

If volatility is making you anxious about your own plan, the most useful next step is rarely a portfolio decision. It is a conversation – schedule a free consultation with our team today.