MILWAUKEE, March 25, 2019 – One certainty in investing is that markets rarely go straight up. While we know market volatility is a given, extreme market moves – the big declines that can approach or exceed the 20% drop that typically defines a bear market – can be unsettling for many investors.   

“It’s important not to let market volatility cause you to lose focus on longer-term strategies and goals,” cautioned Baird’s Director of Advanced Planning Tim Steffen, CPA/PFS, CFP®, CPWA®, who is often asked what investors should do in periods of upheaval. “We generally don’t view market volatility as a reason for longer-term investors to be overly concerned.”

According to Steffen, proper diversification and an asset allocation strategy designed to control risk are key. “In our experience, having a thoughtful, intentional plan in place for how you’ll manage market volatility when it strikes and staying invested over the long term makes the most sense,” he said.   

While markets go down, they also can stage powerful recoveries. “Some of the strongest single-day rallies tend to occur within down-trends,” Steffen said. “It is important to be aware of the overall market environment and take steps to manage risk proactively rather than in a reactive fashion when emotions and fears can overwhelm perspective.”

Steffen offers the following strategies for investors concerned about ongoing market volatility:

  • Know your emotions: Behavioral economists tell us that too many investors sell when they should buy during down markets. They let emotions – not reason – drive their decision-making. Studies illustrate that investors feel the pain of loss more than they feel the joy of a gain. “When you start to feel pressure to sell during a downturn, remind yourself of past downturns and the recoveries that followed,” Steffen said. “Talk to your advisor about your long-term plan and try not to let your feelings drive your decisions.”  
  • Use the market downturn to your advantage: While it’s difficult to predict when the market will turn, Steffen suggests using the power of dollar-cost averaging to your advantage. By splitting up a lump sum investment into equal parts that are invested in regular monthly or quarterly purchases, you buy more shares when prices are down and fewer when prices are high.
  • Have a rebalancing plan: When one part of a portfolio outperforms another, over time that portfolio will drift away from the target asset allocation.  For many, though, the fix for this will seem counterintuitive – sell the parts of the portfolio that have outperformed and reinvest in the areas that have underperformed.  Without regular rebalancing, the portfolio can easily be skewed to where it has taken on more risk – or become more conservative – than what may be right for your situation.  Rebalancing after every move in the market isn’t appropriate, so it’s best to set a range for your target allocations, and only rebalance when you exceed that range.
  • Resist the temptation to try and recover your losses all at once: Doubling down on poor investments or reaching for an aggressive investment that might have a higher upside (but also a lower downside) could leave you in an even worse position than before. Rome wasn’t built in a day; rebuilding a portfolio after a period of losses is best done with a systematic, well-planned approach. Reaching for a home run may work sometimes, but more often than not, it leads to additional losses.
  • Hold more cash: Holding higher-than-normal levels of cash could provide the scarcest of all resources: liquidity in periods of stress. By cash, we mean cash or something so similar it is indistinguishable. “Cash can give you some firepower when you need it most – when stocks become cheap.”
  • Reconsider your timing: Down markets are problematic for investors approaching or just entering retirement when the sequence of returns risk can be significant. A downturn at the start of your retirement can draw down your portfolio, forcing you to sell depressed assets or seriously cut back spending. “For some approaching retirement, it may make sense to reconsider your financial plan and potentially cut back on riskier, or more volatile, assets. In a prolonged market decline, it may even make sense to continue working and delay retirement for a while to rebuild your portfolio.”
  • Be careful with RMDs: Retirees over 70 ½ who are required to withdraw money from retirement accounts should consider waiting to withdraw funds until later in the year. “Waiting a few months for the volatility to pass can often make a difference.” 
  • If you really can’t sleep: If you are staying up at night over worries about losing money, it may be time to reevaluate your allocation to equities. “Be open and honest with your advisor. This is a sign your tolerance for risk has changed and it might be time to reallocate to safer, less-volatile or guaranteed investments,” Steffen said.

To schedule an interview with Tim Steffen on this or other wealth management topics, contact Amy Nutter, Baird Public Relations, at (414) 765-3988 or For more insights, follow Tim Steffen @TimSteffenCPA on Twitter.

About Baird
Celebrating its 100th anniversary in 2019, Baird is an employee-owned, international wealth management, asset management, investment banking/capital markets, and private equity firm with offices in the United States, Europe and Asia. Baird has approximately 3,500 associates serving the needs of individual, corporate, institutional and municipal clients and more than $208 billion in client assets as of Dec. 31, 2018. Baird is the marketing name of Baird Financial Group. Baird’s principal operating subsidiaries are Robert W. Baird & Co. Incorporated in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s investment banking and private equity operations. For more information, please visit Baird’s website at

For additional information, contact:
Amy Nutter
Baird Public Relations
(414) 765-3988