There may be no greater fear than the unknown – especially when it comes to money and long-term financial security. When economic shifts, interest rate policy, or geopolitical events roil the markets, investors understandably want to do what they can to protect their investments. But when you’re managing through market turbulence, the best solution is steadiness.
“Safeguarding against unpredictability should be part of your long-term investing plan, because over time, uncertainty is a certainty,” said Rich Guerrini, president and CEO of PNC Wealth Management. “Not everyone will be an expert on how to handle the ups and downs of the markets, so having guidance from a trusted advisor can be critical to staying steady when things get choppy.”
But how can you practically prepare for an impact you can’t predict? Consider the following principles:
1. Remember that Unpredictability is Normal
It would be ideal if you could plan for continuous growth in the markets without any setbacks, but that’s not realistic. It’s entirely normal for there to be periods of economic growth, periods of contraction, and periods of market recovery over time. The good news is history tells us that over time, periods of growth will likely outpace the time that the markets spend in contraction.
Historically, since 1947, the U.S. economy has experienced approximately 14 periods often described as “bear markets,” generally defined as a 20% drop in value from the market’s high point to its low.
Those dips have consisted of periods of just a few months to just under two years, but they’re minimal compared to the extended periods of time that the market has spent in sustained growth mode. In short, over time, the best strategy to power through uncertainty is generally to not overreact and wait it out.
2. Know Your Own Situation
While patience is a virtue when the market is choppy, there are instances where more immediate action may be warranted – particularly if you’re nearing retirement or are otherwise counting on your investments for income in the near-term. Your time horizon is the period you have to allow your investable assets to grow in the marketplace before you’ll need to draw on them. Although life is unpredictable, mapping out a timeline for when you plan to retire or begin liquidating investments can help you adjust your investment mix to better weather short-term shifts in the market.
Investors often consider adjusting their investment mix more conservatively in the years before you plan to draw on investments in order to buffer against a potential downward movement of the market. Conversely, knowing you have time to recover short-term losses from market changes can give you peace of mind when times get tough. An advisor can be critical in helping you map out your own timing plan based on your unique investment situation and financial goals.
“As your timeline in the market shortens, your investment strategy should sharpen,” Guerrini said. “It’s appropriate to be patient when time allows, but preparing for the inevitability of market turbulence is what truly protects your future.”
3. Revisit, But Don’t React
The most effective way to buffer inevitable unpredictability in the market is to build a diverse portfolio of investments and rebalance it over time. The key, however, is to view portfolio rebalancing as routine maintenance rather than a reaction to whatever is currently happening in the market.
Your investment portfolio should be properly balanced to avoid overexposure to different industries and asset classes in the event of a market downturn, but also to reflect where you are in terms of your time horizon. A set schedule of when you review your investments and make adjustments – such as quarterly, bi-annually, or annually – can provide opportunity to regularly adjust without being driven by reactionary decision-making or outside noise.
4. Own What You Can Control
A turbulent market can leave investors feeling powerless and while staying the course is often best, it’s not necessarily soothing in the moment. While you shouldn’t make knee‑jerk changes to your portfolio during periods of volatility, there are steps you can take to stay on track with your financial goals.
A challenging marketplace can present the right opportunity to re-evaluate expenses, or what you are putting into liquid investments like savings accounts or money market accounts. If you have excess capital, an underperforming market may present an opportunity for some investors to consider increasing your investment level in certain asset classes. A down market can also be a time to explore if tax loss harvesting - selling assets at a loss and reinvesting those proceeds into a new investment – could help reduce your tax liability.
“When markets are unpredictable, investors can find strength by focusing on what they can control —discipline, strategy, and their commitment to long‑term goals,” Guerrini said.
5. Build a Cash Reserve
It’s common advice to build an emergency fund, preferably sufficient enough to cover at least three to six months of living expenses. This reserve provides available liquidity to cover a major or unexpected expense or to buffer against a sudden loss of income. But a sufficient emergency fund also helps protect your portfolio. Specifically, having a substantially funded emergency fund in a liquid account can prevent you from needing to liquidate your investments at a loss during a market downturn.
Holding too much cash or avoiding investment risk by stashing cash can be an unwise opportunity cost. But it’s also true that you can invest your cash in a more conservative vehicle, such as a high-yield savings account or a money market account to allow for modest growth while preserving liquidity.
6. Work With an Advisor
Markets are unpredictable and that can be particularly unnerving when it feels like your financial future is on the line. But you shouldn’t have to navigate it alone. An advisor can help you balance your growth goals with the risks of the marketplace, and they can work with you to identify goals, build and rebalance your investment portfolio, and create a strategy for when and how to draw on your investments.
“Drawing on the experience of an advisor is certainly about making practical financial decisions in preparation for whatever the market environment gives,” Guerrini said. “But it’s also about having a partner for your financial journey, who can provide stability and reassurance during uncertainty.”
Turbulence in the market can be challenging for investors no matter your time remaining in the market or your level of investment. If you’re unsure how to manage through, talk to a professional financial advisor who can help support your long-term goals.
