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3 Things You Should Never Do When the Stock Market Is Volatile (and 3 Things You Should)

By: Martha C. White

Editor: Katherine Peach

Published: Apr 7, 2025 9:19 p.m. EDT 7 min read

Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.

Three arrows crashing down into the ground

Money

President Donald Trump’s pledge not to back down from levying an unprecedented slate of tariffs on nearly all of the country’s trading partners sent stocks plummeting for a third day on Monday, even as a growing number of corporate leaders warned that the “Trump recession” is increasingly likely — if not already here.

While this upheaval can seem bewildering and frightening for ordinary investors, market experts say there are a few things you can and should do right now — along with a few other things you should resist the temptation to do.

Here’s how to get through this market turbulence with your savings and your sanity intact.

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Don't panic and cash out

Trying to time the market is generally an exercise in futility — even financial pros often get it wrong — and can make your financial situation worse in the long term.

Bailing out of stocks when they plunge raises the likelihood that you’ll miss out on the early days of a market turnaround, which can be pivotal to recovering losses.

An analysis of market returns over a 30-year period by Hartford Funds Management Group found that if you weren’t invested during the market’s 10 best days — a large majority of which took place shortly after the market’s most punishing days — you would have cut your investment returns by half. If you had missed just the 30 best days over a 30-year period, you would have pared your returns by 83%.

And if you anticipate a recession, pulling out of the market and waiting until it’s over to reinvest means you’ll probably wind up missing that crucial recovery period and lock in your losses, Robert Johnson, a professor at the Heider College of Business at Creighton University, told Money earlier. “If one waits to enter the market again when the recession has ended, the market has typically already risen.”

Don't look at your 401(k)

We know — it's like rubbernecking at a car crash. But resist the temptation to look at your retirement accounts. “The first thing you should do is protect your portfolio from your emotions,” Sam Stovall, chief investment strategist at CFRA Research, told Money earlier. Stressing out about the amount of your current balance or comparing what you have today with what you had last month or last year is a pointless exercise because those figures reflect only hypothetical gains and losses, he added.

“You haven't lost anything unless you’ve sold,” he said.

Don’t lose sight of the big picture.

“The top mistake investors make in volatile markets is to focus on short-term doom and gloom," Michelle Soto, a financial planner at Cerity Partners, told Money previously.

Markets are cyclical, a fact that can be easy to forget when you’re looking at a sea of red on a screen. Bear markets — even severe ones — are part of that cycle, and a well-designed financial plan will take both peaks and troughs in stride.

Dollar-cost averaging, or investing modest amounts of money at regular intervals whether stocks are going up or down, is a reliable technique for growing your nest egg without having to worry about buying at the “right” time.

"It takes emotions out of it," said Marguerita Cheng, a certified financial planner at Blue Ocean Global Wealth.

Stock market downturns can be a good opportunity to focus on your long-term financial goals and can even be a buying opportunity. Continuing to invest via payroll contributions or other mechanisms even when stock prices are volatile is a form of dollar-cost averaging that doesn’t require you to have any specialized investing skill and doesn’t require you to keep track of the market’s day-to-day fluctuations — which is nice when alarming headlines are just a click away.

Do educate yourself about the market

Being informed about the terminology and mechanisms that move the broader market can temper the fear factor when volatility is high. Understanding what a market “circuit breaker” is and what circumstances can trigger it, for instance, can assuage worry that a steep plunge in stock prices could wipe out your retirement nest egg.

Understanding how events like corrections and bear markets are defined and influenced by outside forces can make it easier to interpret the deluge of information — and misinformation — on social media platforms.

And even if you don’t plan to engage in more sophisticated investing activities like hedging your risk with derivatives, being knowledgeable about how these types of instruments function in the market can give you perspective on what risks you can control and what strategies can help you balance growing wealth with mitigating losses.

Do rebalance, if necessary

Over time, it’s not uncommon for a portfolio allocation to shift, which is why financial planners recommend checking in with your accounts a few times a year and making necessary adjustments to rebalance your portfolio and keep your asset allocations in line with your long-term financial goals.

When stocks experience a lot of volatility in a short time frame, an allocation can be thrown out of whack much more quickly, Matthew Gelfand, executive director of Tricolor Capital Advisors, said in an interview with Money. "When the market experiences major changes such as the 20% stock market decline [in 2022], investors' portfolios will evolve away from their planned allocations," he said.

Do lock in today’s high savings yields

Growing recession fears have increased expectations that the Federal Reserve will lower interest rates. According to the CME FedWatch Tool, which uses futures market activity to forecast the market's rate expectations, there is currently a roughly 31% probability that the Fed’s benchmark federal funds rate will end the year more than a percentage point lower than it is now, up from around 8% just one week ago.

For the moment, though, savers can take advantage of yields on fixed-income instruments like CDs and short-term Treasury bills that reflect the current fed funds range of 4.25% to 4.5%. FDIC-insured products like CDs deliver a combination of security and a return that — for the moment, at least — is higher than the current inflation rate.