How to Invest During Market Volatility?

by | Mar 4, 2020

With the recent fluctuations in stocks, investors have been left wondering how to invest during market volatility. Market volatility causes stress, anxiety, and worst of all, doubt. Doubt is what causes investors to question their previous plan or strategy if one was present. Doubt can turn into panic and panic into poor decisions.

Nevertheless, markets are volatile, and markets do fluctuate. Although the long-term track of the stock market may be positive, we do experience times when the market is negative. How you respond during these times will likely have a massive impact on your level of investment success.

Here are four things to remember during times of market volatility:


1. Volatility is Normal

If you’ve been an investor for any length of time, you have probably experienced several periods of market volatility. If not, it’s important to understand that these events are normal and should be expected.

According to The Capital Group, declines of 10% or more in the S&P 500 Composite Index occur about once per year and last for 114 days, with the last occurrence being in December of 2018.1   The Capital Group also says that declines of 15% happen about once every 4 years. Furthermore, declines of 20% or more happen about once every 7 years.1

If investors understand this and set our expectations properly up front, they can have a better overall investment experience. Not only that, the experience will come with less surprise, angst, and financial stress.


2. The Financial Media Are Not Fiduciaries

Many investors aren’t privy to the history of the stock market and only know what they hear or read in the media. However, allowing the financial media to influence your personal investment decisions is a recipe for disaster.

We must all understand that the pundits and so-called “experts” on major media networks are not fiduciary advisors. They are not incentivized to help you become a successful investor. In fact, I would argue they are incentivized to do the opposite through the manufacturing and spreading of fear.

Fear drives ratings. It makes us act irrational, paralyzing us and keeping us glued to our televisions. Fear is the most powerful tool the media has to use, and they use it often.

In nearly of decade of working as an advisor, I’ve seen headline after headline about multiple crises we’ve faced as a global society. In recent history alone, there has been the Coronavirus, the China-US “Trade War,” nuclear tensions with North Korea, the Presidential Election of 2016 (and 2020), naturals disasters, wars, and the list goes on.

The media will do everything in their power to get you to think that “this time is different.” However, while those events are sold as being “bigger, scarier, and worse” than other world events, they have not stopped the world market from moving onward and upward.

3. Follow Your Own Advice

I’ve found is that many people I talk to about investing seem to know, or at least say, the right information. In my conversations with investors, people say they know the markets fluctuate. They know that you can’t time the market effectively. They know they need to be diversified and they know they should “buy low and sell high.”

However, when volatility arrives, investors suddenly want to abandon what they know to be right. They start to wonder if they should “exit” the market by selling stocks and investing in bonds or cash.

Trying to avoid temporary market declines can often lead to missing out on the upside that you could receive by staying invested in stocks. For these investors, loss doesn’t appear as a loss of principal, but a loss of opportunity.

My general advice to investors is to follow your own advice. Don’t try and time the market and understand that the market does fluctuate. Don’t try to avoid it. Embrace it.


4. Remember Your Time Horizon

A timeless staple of investing is you must always remember your time horizon and invest accordingly. If you are a long-term investor, then choose an investment or mix of investments that is appropriate for that time frame.

If you are planning to be invested for 6 months and will then need to withdraw your investment for a down payment on a home, invest in something designed for shorter time periods, not stocks. Remembering this key thing can be very helpful during a market downturn, when people may get the urge to sell their stocks at a loss.

Consider your home. Let’s imagine you purchase your home for $200,000, but after three years, the same home is appraised at $100,000 due to a local real estate catastrophe. While that may be a hard pill to swallow, would it change your lifestyle? Probably not. You certainly wouldn’t be rushing to sell after such a poor appraisal.

In fact, I would guess that you’d just stay put and understand that your home has a long-term use. There would be no need to do anything different, except maybe go and purchase neighboring real estate at a low price!


Bottom Line

Overall, when market volatility arrives, investors ask themselves, “Should I be doing something different?” If that is you, that question tells me you need to revisit your original investment plan. If your plan was created with the assumption that volatility would occur, then why would your plan not be okay now?

For those that don’t have a plan, then it’s paramount to get one, and enlisting the help of a qualified professional to help you would be a good first step. Ultimately, applying these tips during times of marketing volatility should help you navigate future market volatility.



1  What Past Market Declines Can Teach Us. The Capital Group.

Joe Allaria is a Partner and Wealth Advisor with CarsonAllaria Wealth Management. For his numerous articles, Joe has been featured in the Wall Street Journal, USA, Yahoo Finance,,, and Investopedia. Joe is also a CERTIFIED FINANCIAL PLANNER™ professional, which identifies those individuals who have met the rigorous experience and ethical requirements of the CFP Board, have successfully completed financial planning coursework and have passed the CFP® Certification Examination.