Navigating A Volatile Market With A Steady Investment Plan

How can 10 days cost you over $200,000? The answer might surprise you.

We have seen significant volatility in the market in 2025, and many people feel nervous about their investments. During times of market turmoil, selling your assets that declined in value might feel like a smart move, but history shows that it could be a mistake.

Consider the period between October 2007 to March 2009. The S&P 500 fell more than 50% during that time frame. If an investor reacted to their losses by selling, they likely lost a substantial amount. If instead they chose to stick with their investment plan, they did well because the market completely recovered from its losses by spring 2012.

This is a clear example of why I advise my clients not to let their emotions cause them to react irrationally.

Jumping in and out of the market to react to its performance is also known as timing the market, which is impossible to do reliably. A recent study conducted by Prudential found that, with a $100,000 initial investment in 2004, staying invested through 2023 would see the account grow over $428,875. If, however, the investor tried to time the market and missed just the best-performing 10 days in that time period, the account would only be worth $196,735 — a $232,142 reduction in portfolio performance!

When you sell because your assets have lost value, you won’t be able to participate in gains if their value should increase again. This is known as “locking in your losses.” One good way to avoid this is to have a portfolio aligned with your risk tolerance.

Carefully consider the amount of risk you are comfortable with. If you’re the type of investor who is likely to feel awful when your assets decline in value, it might be prudent to consider a more conservative portfolio to avoid tempting you into making rash decisions.

If, on the other hand, you are comfortable with temporary losses in value and will stay invested when such declines happen, you could benefit from a more aggressive portfolio with a higher potential yield. Traditionally, financial advisors often recommended a two-pronged portfolio of stocks and bonds, divided according to their clients’ risk tolerance. This allows clients to take advantage of the market’s potential for gains while keeping the rest of their investments in safer assets.

However, today’s volatility has some shifting focus toward a three-pronged portfolio frequently consisting of 60% stocks, 20% bonds and 20% alternative assets such as real estate. That’s often fine for people still in their working years, but I encourage clients in or near retirement to move away from such heavy exposure to stocks.

In retirement, it’s important to consider where your income is generated. If you rely primarily on market assets for retirement income, you could suffer financial losses should their value drop without having time to recover before you need to withdraw from that account. As with any strategy, it’s essential to understand all risks involved.

I coach clients to think of invested money as being in two categories: red and green money. Red money refers to assets that carry a higher risk of loss but also higher potential return, such as stocks. Green money is safer money, like municipal bonds and fixed annuities. The growth potential may be lower, but the tradeoff is lower risk.

It’s important to avoid allowing short-term market conditions to derail your investment strategy. A trusted financial advisor can help you devise a strategy appropriate for your unique financial situation and serve as an accountability partner to help keep you from making rash decisions that could harm your finances.

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

Jason LaBarge, financial advisor and president of LaBarge Financial
7 Riggs Avenue, Severna Park, MD 21146
443-647-4321
www.labargefinancial.com

Securities offered only by duly registered individuals through Madison Avenue Securities LLC (MAS), member FINRA/SIPC. Investment advisory products and services made available through AE Wealth Management LLC (AEWM), a registered investment advisor. MAS and LaBarge Financial are not affiliated entities.

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