Staying the Course: Why Long-Term Investors
Should Welcome Market Volatility
By: Michael J. Boosel, CFP® Managing Director, Senior Investment Consultant
If you’ve been following the financial news lately, you’ve probably seen a familiar pattern: when markets are rising, headlines warn that stocks are overvalued and due for a fall. When markets decline, the same outlets caution that things could get worse. While past performance is not a guarantee of what is to come, it’s a cycle that has repeated itself, often leaving investors wondering: Is it ever a good time to invest?
The answer, backed by nearly a century of market history, is a resounding yes—as long as you have a plan and the discipline to stick with it.
Volatility Isn’t a Bug—It’s a Feature
Market corrections and bear markets are not anomalies; they are a normal and expected part of the investing journey. Since 1966, the average bear market has lasted about 15 months and resulted in a 38% decline. In contrast, the average bull market has lasted nearly six years and delivered gains of over 200%. Even the shortest bear market on record—in March 2020—lasted just one month and was followed by a rally of more than 120% in under two years.
These statistics, from the Schwab Center for Financial Research, highlight a critical truth: the market has always recovered. The key is not to avoid downturns, but to endure them with a steady hand and a long-term perspective.
The Cost of Market Timing
One of the most damaging behaviors investors can engage in is trying to time the market. According to data from Schwab and BlackRock, missing just the 10 best days in the market over a 20-year period can cut your returns nearly in half. Miss the top 20 or 30 days, and the impact is even more severe.
What’s more, many of the best days in the market occur during or immediately after the worst days. For example, seven of the top 10 days for the S&P 500 over the past 20 years occurred during or shortly after the 2008 financial crisis. This means that getting out of the market during a downturn often means missing the recovery—the very period when gains are most concentrated.
What If the Market Drops 20%?
Let’s consider a scenario that often makes headlines: a 20% market decline. How would that affect you?
If you’re still in the accumulation phase—saving for retirement or other long-term goals—a market decline is not a catastrophe. It’s an opportunity. As prices fall, your regular contributions buy more shares. It’s the investment equivalent of buying quality goods on sale. Over time, this can enhance your long-term returns.
For retirees or those nearing retirement, the conversation shifts. Drawing income from a declining portfolio can be risky, which is why a well-constructed financial plan includes a buffer—typically one to two years of living expenses in cash or short-term fixed income. This reserve allows you to avoid selling equities at depressed prices, giving your portfolio time to recover.
Warren Buffett famously instructed the trustees of his wife’s estate to invest 90% in equities and 10% in cash. The principle is simple: equities provide long-term growth and inflation protection, while cash provides short-term stability.
The Market Is “Too High”? Maybe. But So What?
Another common refrain is that the market is “too high” or “overvalued.” While it’s true that valuations fluctuate, history shows that valuation alone is a poor predictor of short-term market performance.
For example, in March 2000, the S&P 500’s forward price-to-earnings (P/E) ratio was 25.2. In January 2022, it was 21.4. Today, it’s around 23 —above the 30-year average of 16.6, but far from unprecedented. And yet, a dollar invested in the S&P 500 in March 2000 has grown to over five dollars today, despite two major bear markets along the way.
The lesson? Even when markets appear expensive, long-term investors have historically been rewarded for staying invested.
The Real Risk: Inflation, Not Volatility
For retirees, the greatest threat isn’t short-term market declines—it’s the long-term erosion of purchasing power due to inflation. Over the past 30 years, the Consumer Price Index (CPI) has roughly doubled. In that same period, the cash dividend of the S&P 500 has increased nearly fivefold, and the index itself has grown more than tenfold.
Equities, with their potential for rising dividends and capital appreciation, have historically been one of the best hedges against inflation. A portfolio overly concentrated in fixed income may feel safer in the short term but can struggle to keep up with rising costs over time.
The Importance of Temperament
Ultimately, successful investing is less about intelligence and more about temperament. As Charlie Munger once said, “The first rule of compounding is never to interrupt it unnecessarily.” That means resisting the urge to react emotionally to market swings and instead relying on a well-thought-out plan.
Your financial plan is designed to help you navigate uncertainty. It’s built around your goals, time horizon, and risk tolerance. It includes diversification, rebalancing, and contingency planning. Most importantly, it’s built to help you stay the course—because that’s where long-term success lies.
Final Thoughts
We can’t predict the next correction, nor should we try. What we can do is prepare. By maintaining a diversified portfolio, keeping adequate reserves, and staying focused on your long-term goals, you can weather whatever the market throws your way. If you’re feeling uneasy or want to revisit your plan, our team is here to help. We can discuss your goals, your strategy, and how we can continue to position you for long-term success—no matter what the headlines say.
We wish you and yours a joyous, peaceful and gratitude-filled Thanksgiving.
Client's Corner by Nick Murray
WITH THE IMPENDING RETIREMENT OF WARREN BUFFETT as CEO of Berkshire Hathaway, the most recognized and respected CEO in American business may be Jamie Dimon of JPMorgan Chase. When he talks, people listen— and deservedly so.
Mr. Dimon was all but universally quoted in literally dozens of media outlets recently when he said:
“There continues to be a heightened degree of uncertainty stemming from complex geopolitical conditions, tariffs and trade uncertainty, elevated asset prices and the risk of sticky inflation.”
Nowhere did I see any report of what he said next......
(click here to view the article).
Planning Moves to Consider Before Year-End Webinar
As the end of the year approaches, are you confident you’re making the right financial moves? Join us for November’s Wealth Strategies webinar to hear from seasoned tax strategists Kelsey Clair CPA, CPWA® and Eric Wikstrom, CPA, CFP®, CPWA®.
Whether you want to optimize your tax strategy, explore smart investment decisions, or set yourself up for a strong start to 2026, this session will equip you with actionable tips and expert guidance you need to know heading into year-end.
Event Details: Friday, November 21, 2025
1:00 PM Eastern | 12:00 PM Central | 11:00 AM Mountain | 10:00 AM Pacific
About the Speakers:
Kelsey Clair, CPA, CPWA® joined Baird in 2020 and is a Senior Tax Strategist for Baird Private Wealth Management. Prior to joining Baird in 2020, Kelsey was responsible for providing tax compliance and tax planning services to high-net-worth individuals and privately held businesses at Dixon Hughes Goodman, LLP.
Eric Wikstrom, CPA, CFP®, CPWA® joined Baird in 2021 as a Tax Strategist for Baird Private Wealth Management. Prior to joining Baird, Eric operated his own tax planning firm specializing in alternative retirement plan investments. Throughout his career in tax, investment and corporate finance capacities, Eric helped develop and structure sophisticated financial solutions to meet the unique goals of individuals and institutions.
If you have missed any of the previous webinars, please click here to view all of the previous webinars through our website.
Odds & Ends
- Emelia Fredlick, Senior Editor for Morningstar.com, wrote a fantastic article providing an overview of "The 60/40 Portfolio: A 150-Year Markets Stress Test". Click here to read the article.
- The IRS recently announced the tax bracket adjustments for 2026 including amendments from the One Big Beautiful Bill. Click here to review the adjustments.
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