Key Takeaways:
- Market volatility can create opportunities to rebalance, invest consistently, and improve long-term outcomes.
- Strategies like tax-loss harvesting and maintaining cash reserves can help manage risk and efficiency.
- Staying disciplined and aligned with a long-term plan is key to navigating uncertain markets.
Market volatility can feel uncomfortable, especially when headlines focus on uncertainty and short-term declines. However, volatility is not just risk; it can also create opportunity when approached with a clear plan.
For long-term investors, the goal is not to avoid volatility entirely, but to use it in a way that supports better outcomes over time. The strategies below focus on how to stay disciplined, make thoughtful adjustments, and turn market fluctuations into a more productive part of your financial plan.
1. Rebalance Your Portfolio Strategically
Market swings naturally push portfolios away from their intended allocation. Over time, certain assets may become overweight while others fall behind.
Rebalancing restores your portfolio to its original targets by trimming positions that have grown disproportionately and adding to areas that have declined.
This process helps:
Maintain your intended risk level
Systematically “buy low and sell high.”
Keep your investment strategy aligned with your long-term goals
Volatility often creates the best rebalancing opportunities, especially when market moves are uneven across asset classes.
2. Focus on Long-Term Asset Allocation
Short-term market movement can distract from what matters most: your overall allocation.
Your mix of stocks, bonds, and other assets is one of the primary drivers of long-term performance, not short-term market timing decisions.
During volatile periods, it can help to:
Revisit your time horizon
Confirm your risk tolerance still aligns with your plan
Avoid making reactive allocation changes based on headlines
A well-structured allocation is designed to withstand different market environments, including periods of uncertainty.
3. Use Tax-Loss Harvesting to Improve Efficiency
Volatility can create opportunities to realize losses in taxable accounts, which may help offset gains and reduce overall tax liability.
Tax-loss harvesting involves:
Selling investments that are temporarily down
Using those losses to offset capital gains or income (within IRS limits)
Reinvesting in similar (but not identical) assets to maintain market exposure
This strategy can improve after-tax returns over time without requiring major changes to your overall investment approach.
4. Continue Investing Consistently
One of the most effective ways to navigate volatility is to stay consistent with contributions.
Regular investing, often referred to as dollar-cost averaging, means you continue investing regardless of market conditions.
Over time, this approach can:
Reduce the impact of short-term price swings
Allow you to purchase more shares when prices are lower
Build discipline into your investment process
Trying to time market entry points often leads to missed opportunities. Consistency tends to be more reliable than prediction.
5. Maintain Adequate Cash Reserves
Volatility becomes more difficult to manage when you’re forced to sell investments at the wrong time.
Maintaining a cash reserve helps reduce that pressure by covering:
Short-term expenses
Unexpected costs
Income gaps during market downturns
With sufficient liquidity, you’re less likely to make reactive decisions that disrupt your long-term strategy.
6. Look for Selective Buying Opportunities
Market declines can create opportunities to purchase high-quality investments at more attractive valuations.
Rather than viewing downturns purely as losses, they can also be:
Entry points for long-term positions
Opportunities to add to existing holdings
Chances to improve portfolio positioning
This approach works best when guided by a clear investment framework, rather than reacting to short-term market movements.
7. Stay Focused on Your Financial Plan
Volatility often tests investor behavior more than investment strategy.
A well-constructed financial plan is designed to account for market fluctuations. Staying aligned with that plan can help you avoid decisions driven by fear or uncertainty.
This includes:
Reviewing your plan periodically
Adjusting when your life circumstances change
Avoiding frequent, reactionary shifts based on market noise
Long-term success is often tied more closely to behavior and consistency than to short-term market performance.
How Volatility Fits Into a Long-Term Strategy
Market volatility is not an exception; it is a normal part of investing.
Over time, markets move through cycles of growth, decline, and recovery. Strategies that acknowledge this reality tend to be more durable than those that attempt to avoid it entirely.
A thoughtful approach to volatility focuses on:
Maintaining discipline
Making incremental adjustments
Aligning decisions with long-term objectives
Common Mistakes Investors Make During Volatility
Even experienced investors can fall into patterns that work against them during uncertain markets. Some of the most common mistakes include:
Selling investments after markets decline
Moving too heavily into cash and missing recoveries
Trying to time market bottoms and tops
Abandoning a long-term strategy too quickly
Avoiding these behaviors can be just as important as implementing the right strategies.
When Volatility May Require a Plan Adjustment
Not every market movement requires action, but some situations justify a closer review.
It may make sense to revisit your plan if:
Your time horizon has changed
Your income or expenses have shifted
Your risk tolerance feels different from what it did before
You’re approaching retirement or another major milestone
The key is distinguishing between market-driven anxiety and legitimate planning changes.
FAQs: Investing During Market Volatility
1. Should I change my investments during market volatility?
Not necessarily. Most changes should be driven by your financial plan, not short-term market movement.
2. Is volatility a good time to invest more?
For long-term investors, volatility can create opportunities to invest at lower prices, though decisions should align with your overall strategy.
3. What is the biggest mistake to avoid during a market downturn?
Selling investments in response to short-term losses is one of the most common and costly mistakes.
4. How often should I rebalance my portfolio?
Many investors review allocations annually or during significant market shifts, though timing depends on your strategy.
5. Does volatility affect retirement planning?
Yes. Volatility can influence withdrawal strategies, sequencing risk, and income stability, especially near retirement.
Turning Volatility Into a More Intentional Strategy
Market volatility can feel disruptive, but it can also be a productive part of a well-structured financial plan.
The difference often comes down to preparation. When your investment decisions are connected to a broader strategy, volatility becomes something you can respond to thoughtfully.
A disciplined approach that focuses on allocation, taxes, cash flow, and long-term goals can help turn uncertain markets into more manageable and sometimes advantageous environments.
Material for this episode was derived from two Forbes articles on the subject: How Tax-Loss Harvesting Works, February 26, 2025 and 8 Top Tax-Loss Harvesting Tips to Reduce Your Tax Bill, November 13, 2024.
John Gigliello is a registered representative with and securities are offered through LPL Financial, Member FINRA/SIPC. Investment advice is offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Albany Financial Group are separate entities from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Albany Financial Group and LPL Financial do not provide tax advice or services. Please consult your tax advisor regarding your specific situation.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.
John Gigliello, CFP®
John Gigliello, CFP®, is a fee-based fiduciary financial planner in Albany, NY, serving individuals age 50+ with comprehensive planning and investment management, centered around proactive and advanced tax planning. John earned a Certificate in Financial Planning from Boston University and, more recently, successfully completed the rigorous CFP® Certification examination to become a CERTIFIED FINANCIAL PLANNER™. John earned the Accredited Investment Fiduciary® Designation from the Center for Fiduciary Studies®, the standards-setting body for Fi360. The AIF® designation signifies specialized knowledge of fiduciary responsibility and the ability to implement policies and procedures that meet a defined standard of care. John currently serves on the Albany County Investment Advisory Board, having been appointed by a unanimous vote of the County Legislature in January 2019. In this position, John advises the county on a strategy for making the best use of money available for investment.