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2025’s market volatility is proving to be one for the record books.

Here’s the thing about turbulent markets: They can turn us into our own worst enemy.

But how much more damage can you do to your investment returns when the market’s already in a tailspin? Plenty.

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Selling into a decline

Let’s say your diversified retirement portfolio experiences losses week after week amid big declines in the market. You get anxious.

Listening to the media only deepens your anxiety. You’re tricked into thinking “this time is different” and that the market’s good times are gone forever. You move your portfolio into cash to protect it from further losses and to put an end to your anxiety. For now, you feel better, but you’ve dug yourself into a deeper hole.

How’s that?

Your portfolio is now in cash. It won’t benefit from future market rallies that may have been right around the corner. Instead, you sold into a market decline, locked in losses and are left with a lower portfolio balance. You may be seriously offtrack from retiring on time, or worse, may not have enough during retirement.

The stakes are high, so beat the market at its own game. When the market has a big loss that impacts your portfolio, don’t act on your emotions. Stick to the facts.

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Basic market facts

• Market declines are finite and have tended to be short term.
• Bear markets (when the market drops 20% or more from its most recent high) have historically lasted for about a year, on average, and some have lasted much less.
• Major rallies can strike out of the blue, especially during bear markets or near-bear markets, like the S&P 500’s astonishing rally when tariffs were paused in April.
• The market has had an upward bias long term, so it has rewarded staying invested.

Remember the steep market declines during Covid-19, the global financial crisis and the 2022 inflation spike? Now try to remember the market recoveries that followed. Although past performance is not a guarantee of future results, this year’s tariff-driven selloff needs to be seen with those facts in mind.

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Four charts to help guide you

Let’s help you with more facts. When the market declines and your emotions start taking over, remind yourself of the four charts below:

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#1

Expect the market to have sharp and short-term declines

The chart below depicts calendar year returns since 1960. As you can see, it’s natural for the market to experience declines, including losses of more than 20%, also known as bear markets. An annual market loss has been frequently followed by a healthy recovery the next year.

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U.S. large cap stocks, 1960 to 2024

Source: Morningstar Direct.
NOTES: ��Columns represent calendar year returns of the S&P 500, from 1960 to 2024. Red dots represent intra-year max drawdown (the largest peak-to-trough decline for the index within a given calendar year).

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#2 ��

Play the long game

The market’s long-term upward bias is evident by the chart below. It has suffered a number of declines of more than 15% since the global financial crisis in 2008, but its cumulative return since then is above 400%.

Global equities have risen over time despite declines in between

Source: MSCI, Bloomberg as of Dec. 31, 2024.
NOTE: Data reflects MSCI ACWI Index.

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#3

Patience can create an investment edge

Moving to cash after a large market decline and then staying out of the market for just one year can set you back a lot. The setback can worsen considerably the longer you’re out of the market.

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Returns of cash vs. a 60/40 stock & bond blended benchmark since the global financial crisis

Source: IA SBBI, Morningstar Direct; as of Dec. 31, 2024. ��
NOTES: Initial investment of $100,000 in 60/40 stock/bond blended benchmark (using index proxies) made on 1/1/2007; initial move to cash made on 11/30/2008. Portfolio holdings are as follows: 40% IA SBBI US Intermediate-Term Govt Bond TR USD, 50% IA SBBI US Large Stock TR USD, 10% IA SBBI US Small Stock TR USD.

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#4

Diversified portfolios: the potential for healthy returns and less volatility

Volatility is a part of investing, but the chart below shows that diversified portfolios can offer healthy average returns despite experiencing declines from to time to time. When you compare these returns versus the returns of just large-cap stocks in chart #1, diversified portfolios have declined less while still capturing upside. In this way, diversified portfolios have the potential to offer a “smoother ride” over time.

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U.S. 60/40 blended benchmark returns, 1960 to 2024, with an average return of 9%

Source: Morningstar Direct.
NOTES: Columns represent calendar year returns for a 60% IA SBBI U.S. Large Stock/40% IA SBBI U.S. IT Govt Bond Index blended benchmark, from 1960 through 1979; 45% IA SBBI U.S. Large Stock Index/15% MSCI EAFE GR USD/40% Bloomberg U.S. Agg Bond TR USD Index blended benchmark, from 1980 through 2024. Red dots represents the intra-year drawdown (the largest peak-to-trough decline for the blended benchmark within a given calendar year). “Average” represents the average calendar-year return of the blended benchmark for the period shown.

Knowledge is power

Reference these charts to help combat portfolio anxiety. You deserve to have all the investment facts you need to help you protect your portfolio during market declines. One of your best resources is your 91��̳ Engines financial planner, so reach out.