After a strong stretch in markets, it's easy to drift into a subtle assumption: maybe the next few years will look like the last few years.
That assumption is understandable, and expensive.
Markets don't send warnings before they get rough. And the biggest risk isn't that a downturn shows up. The biggest risk is what investors tend to do when it shows up.
That's why the right goal isn't to "get out before the decline." The right goal is to build a portfolio that can stay on the road when conditions change.
Volatility isn't a flaw. It's the toll.
Stocks have historically offered higher expected returns than safer assets for a reason: the ride comes with uncertainty. There is no guarantee of a positive outcome over any specific time period, even long ones.
Yes, the likelihood of a positive result has historically improved over longer horizons. But the range of outcomes can still be wide. Time reduces the frequency of bad outcomes; it doesn't eliminate the possibility of them.
So, the planning question becomes: Can your strategy absorb a bad stretch without forcing you into a decision you'll regret?
"Average returns" are not the average experience
One of the great misunderstandings in investing is thinking the market behaves "normally" most years.
Long-term averages can be useful, but year-to-year results are usually nowhere near "average." More often, returns land on the extremes, very good or very bad.
In other words, the long-run average may be steady, but the ride rarely is.
If your plan assumes smooth roads, you'll be tempted to abandon the trip when the potholes show up.
Sometimes the surprises break the neat categories
Many investors lean on a simple comfort: when stocks are down, bonds will save the day.
Often, bonds do help. But not always.
There have been periods when both stocks and bonds struggled at the same time. That doesn't mean markets are uninvestable. It means your plan should be built for real-world outcomes, not just the outcomes that feel tidy.
The most dangerous moments are the emotional ones
When markets fall hard, investors feel an urgent need to act. The most common action is the one that turns volatility into permanent loss:
- selling after declines
- waiting for "things to feel better"
- missing the rebound because rebounds don't schedule appointments
The threat isn't "a crash." The threat is abandoning your plan at the worst time.
What "seatbelts and suspension" look like in a real portfolio
If you want to stay invested through the full range of outcomes, here are the practical tools that matter most:
1) A written allocation tied to goals
Not an allocation built around recent performance. An allocation built around what the money is for, when you'll need it, and how much volatility you can truly tolerate.
2) A cash buffer for near-term needs
If you need money soon, taxes, a home purchase, tuition, business liquiditystocks are the wrong place for it.
Cash isn't a drag if it prevents a forced sale.
3) Broad diversification
Diversification is admitting you don't know which market, which country, or which style will lead next. That's not a weakness. That's reality. And it's one of the simplest ways to reduce the risk that a single segment dominates your outcome.
4) A rebalancing policy
Rebalancing is how disciplined investors respond to volatility without trying to outguess it. It's a pre-committed rule set: trim what has run ahead, add to what has lagged, and keep risk aligned with the plan.
5) A decision rule for stressful markets
This is the part most people skip. Write down your rules now:
- What would justify a change?
- What wouldn't?
- Who do you consult before acting?
- What data mattersand what noise doesn't?
The point isn't to avoid the bumps
It's to survive them.
You don't invest for the years that feel easy. You invest for the full cyclethe years that test patience and the years that reward it.
The investors who do best over time aren't the ones who "see it coming." They're the ones who built a plan that stays intact when it doesn't. If you need a plan, get in touch.
If you want help with any of these at any stage, get in touch to build your plan.
If you would like to learn more about ATX Portfolio Advisors, let's Get Acquainted.
Principal
jeff.weeks@atxadvisors.com
(512) 537-5955
www.atxadvisors.com
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