Market volatility: Don’t just do something; stand there

We often talk about market volatility in the midst of surprise drops, but it’s useful to consider during calmer moments what behavior could be best for your accounts. When markets are in turmoil and account balances start to fall, many people feel a strong temptation to do something to “stop the bleeding” and cut their losses. But it’s often the case that staying the course proves to be the better path in the long run — and sometimes in the short-terms also. As we look back at the extreme market volatility that began at this time last year (Q4 2018), let’s consider how a few different investing scenarios would have played out. According to an analysis done by Vanguard, a hypothetical 60/40 stock/bond portfolio worth $1 million on November 1, 2018 would have lost 5.7% of its value by Christmas Eve. Yet selling the portfolio at that time and getting out of the market, even briefly, would have cost an investor tens of thousands of dollars in two months, compared to the alternative of staying fully invested. When faced with a similar situation, think about how you might feel if markets rebounded and you could have earned back all your