Stay Calm: Avoid Emotional Investment Decisions During Market Downturns

When markets take a hit, it's natural to feel a surge of anxiety. Red numbers, falling charts, and negative headlines can easily stir up fear and doubt, but reacting emotionally to short-term volatility is one of the most common—and costly—mistakes investors make.

Successful investing is about discipline, not emotion. Since their inception, stock and bond markets have experienced periods of highs and lows. Historically, downturns have been followed by recoveries, and those who stay the course are often rewarded. Selling in a panic can lock in losses and derail long-term goals, while staying invested allows your portfolio to rebound with the market.

Take the 2020 market crash (COVID-19), for example. In March of that year, the S&P 500 dropped over 30% in just a few weeks due to pandemic fears. Some investors panicked and sold off their portfolios to “cut their losses.” But, by doing so, they missed the rapid rebound that followed—by the end of the year, the market had not only recovered but reached new highs. Those who stayed invested saw their portfolios bounce back, while those who sold locked in their losses and struggled to reenter the market at the right time.

Instead of making impulsive decisions, take a step back. Review your financial plan and remind yourself why you invested in the first place. If your goals (including if and when you may actually need to spend any of your savings) and your risk tolerance haven’t changed, your strategy probably shouldn’t either.

Lean on facts, not fear. Speak with one of deferred comp’s financial education professionals if you need reassurance. The key is to remain focused, patient, and committed—because staying calm today can make all the difference for your tomorrow.