Should I Keep Investing Even Through Times of Market Volatility?


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?” 

We understand why this question is so often top of mind—especially for those of you who own impacted shares or securities that make up a large percentage of your portfolio, or concentrated positions. Current events such as legislative actions in Congress, the pandemic, and the rapidly-changing economy all have an impact on your portfolio’s bottom line.  

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 is market volatility

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

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 fluctuations. 

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. Since March 2020, factors such as the pandemic, the 2020 Presidential election, economic recovery legislation, and the global reaction to the pandemic have all caused fear of the unknown. 

The occurrence of volatility is quite predictable when you consider all of the vast changes happening in today’s economy and society. However, it is no less alarming to see values plunging some days and increasing others, making an investment feel risky.

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 will miss the 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 Black Monday of 1987 or the dreaded Financial Crisis of 2007-2009, 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.

  1. Be patient. 
  2. Stay the course—and invest more, if you can. 
  3. Trust the process, and the professionals.

Top 3 ways to manage volatility on concentrated positions

1. Be patient. 

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. Consider the below graph, which illustrates the benefits of managing volatility with patience.

Performance is hypothetical for the period from 3/2/2000 to 2/28/2020 and for illustrative purposes only. Past performance does not guarantee future results.

When investors offload shares, they miss out on the gains that occur on top performing days. Of course, we can’t predict exactly when the market will bounce back, but it is prudent to be patient and wait out periods of volatility. 

Avoid making any rash decisions. Instead, stay disciplined and you will benefit in the long run.

2. Stay the course—and invest more, if you can.

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. 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 who have excess cash reserves, this is also a great time to consider investing more. As illustrated by the chart above, the seven major S&P declines bounced back in the next 12 months, with gains oftentimes outpacing the original decline. It’s not easy to take this forward-facing perspective, especially during times of a stock market scare; however, we advocate for trust and confidence in the historical patterns that continue to play out into the future.

If you’re in need of cash, we do not recommend pausing or withdrawing from your retirement investment accounts. Foregoing your normal monthly contributions reduces the likelihood that you will take advantage of the market bounce-back effect discussed above, and withdrawing from a retirement account can result in tax penalties and other consequences for the overall health of your financial well-being.

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 professionals are well-versed in the small, tactical changes that should be made during 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.

For example, consider our Quarterly Market Outlook for Q4 2021. We minimize risk and enhance returns for our clients by tapping into our experience, knowledge and available resources - making tactical moves for your benefit. Therefore, it behooves you to trust the process and the professionalism of your wealth management team during periods of market volatility.


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! 

Be patient, stay the course, invest more if possible, and trust that our team will make any necessary moves for you.

Topics: market volatility, financial strategies

Related Posts

Institutional intellect with a personal touch.

Let's Talk