The stock market is inherently volatile, and past performance is not indicative of future results. From 1928 through January 2025, the market declined by 5% approximately 3.4 times annually. In that same period, it dropped by 10% just over once per year, while a 15% pullback occurred roughly every two years. A 20% decline has taken place about once every three years.
However, in today’s 24-hour news cycle, it is difficult to disconnect from market movements and financial headlines. President Trump has been unpredictable in his decisions on tariffs, with new developments occurring daily. Investors react in real-time to executive orders as they are signed, contributing to market volatility.
Every financial adviser will tell you, “Don’t look at the market every day.” They monitor the market so you don’t have to. But let’s be honest—that’s nearly impossible advice to follow.
It’s your money. You’re emotionally invested because that money represents your future. It’s the actions that you take during heightened emotions that define you as an investor. Before you decide to sell your investments and move to cash, pause. Take a step back and recognize that the market is only 5% off its all-time high. What is truly driving your concern?
Investors have been spoiled by the exceptional returns of the past two years, leading to a recency bias. Volatility is normal. Even during the historic bull market from March 2009 through February 2020, we experienced 5%, 10%, and 15% declines. Yet, the strong market performance of 2023 and 2024 has conditioned investors to believe the market should only go up.
Volatility is unsettling, so how do you stay invested and resist the urge to go to cash? Go back to your plan. If you follow the Henssler Ten Year Rule, you have 10 years’ of liquidity needs shielded from market volatility. You don’t need to touch the money you have invested for the long term. So why make changes? If you’re worried about the presidency, remember there will be a new president in four years—possibly two within the next decade.
One of the most common mistakes investors make is giving in to fear. It can be undeniably difficult to open your statement and see that your $100,000 investment is now worth only $50,000. However, investors must remember that it’s not about when you buy—it’s about when you sell. The fundamental value of the companies hasn’t necessarily declined; the market is simply reflecting their current price. If you sell, you lock in the loss. But if you stay the course, your stocks have the potential to recover.
Even with a decade of liquidity protected from market fluctuations, some investors still feel compelled to pull back their equity exposure when the market gets choppy. While they may understand their financial plan, long-term objectives, and the market’s natural cycles, the “sleep-at-night factor” remains a concern. If you’re uneasy with just 10 years of liquidity, consider adjusting to 12 or 13 years of spending needs. Your adviser can illustrate how such a shift might impact your long-term results. And if market conditions turn out to be less severe than expected, you can always dollar-cost average back into the market.
If you have questions regarding your financial strategy, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the March 8, 2025 “Henssler Money Talks” episode.