Investing When the World Feels Crazy: Expert Strategies
Here's how to manage portfolio risk in uncertain times, without losing your cool. Because "a well-built plan ... should not follow the news cycle."
Open safety deposit box with ostrich egg inside
This year has given investors plenty of reasons to feel uneasy: The war in Iran, tariffs disrupting global trade and growing unease about the impact of artificial intelligence. In moments like these, it can feel as if investors need to do something, anything, to protect their nest egg. But that reaction can make a tough situation worse.
"The biggest mistake investors make is assuming they need to react to every headline," says Julian Morris, a financial planner in Boston. "A well-built plan is designed to handle uncertainty, not follow the news cycle." Recent history has shown the value of staying the course. The tariff-driven market sell-off in 2025 and the COVID-19 crash in 2020 both sent stocks plunging before markets quickly rebounded to new highs.
Still, every downturn raises the same unsettling questions. What if this time is different? What if the next downturn looks less like a brief stumble and more like the extended, painful recovery that followed the financial crisis, or worse?
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"Each crisis feels like the worst one, because it's the one you're living through right now." — Ben Howarth
Those worries pop up every time markets dip, says Ben Howarth, a financial adviser in Wethersfield, Conn. "Each crisis feels like the worst one, because it's the one you're living through right now."
After February's record highs, the Nasdaq Composite was down 13% while the Dow Jones Industrial Average and the S&P 500 index were down more than 9% by the end of March. A 10% fall is called a market correction; a 20% fall marks the start of a bear market.
When markets feel chaotic, it's even more important for investors to remain calm. The same disciplined strategies that built a portfolio can help retirees navigate turbulent markets.
The psychology behind emotional trading
Market downturns set off powerful emotional responses that can lead investors to make short-term emotional trades which turn a temporary dip into long-term loss. Investors feel roughly twice the pain from a loss as happiness from a gain, according to behavioral finance research. It takes a $100,000 gain to match the emotional impact of a $50,000 loss.
The modern news cycle intensifies those feelings. In earlier decades, investors might have seen the day's market results on the evening news or in the next morning's newspaper. Today, those updates arrive in a never-ending stream through online news and smartphone alerts.
Even modest pullbacks can feel catastrophic. "We're emotional beings. We see the market flashing red, and it triggers people," says Daniel Milan, an investment adviser in Southfield, Mich.
Consequently, investors need to work even harder to avoid emotional trading. One way to do so is to intentionally avoid checking, even if the news makes you want to. "Put away your statements and stop checking daily," says Marta Norton, chief investment strategist at Empower.
"That's not how you judge the success of your portfolio."
Of course, not everyone reacts to market volatility the same way. Bruce Armstrong, a 77-year-old retired business executive in Pittsburgh, spends his days actively trading stocks and S&P 500 futures. He watches market swings closely and looks for opportunities on both sides of the market. "You've got to take the good with the bad. But it can be scary, even if you know what you're doing."
Armstrong's risk appetite and active trading style are likely beyond most retirees' comfort levels. But when markets fall, long-term passive investors can feel tempted to make a big move, usually by shifting part of their portfolio to cash.
That flight to safety might feel good, but it can create serious long-term problems. First, a loss isn't locked in until you actually sell shares, notes Morris. It also raises another difficult question: When to reinvest? "If investors move to cash, they have to be right twice, knowing when to sell and when to buy back in," says Morris.
Sitting on the sidelines makes it likely to miss the rebound. Some of the market's biggest gains often come during short bursts of trading that follow steep declines.
It doesn't take much time away to make a massive difference. From 1996 to 2025, investors who missed just the 10 best trading days over this period saw their total portfolio returns fall by about 56%, according to an analysis from Hartford Funds.
This pattern of selling low during down markets and buying back after prices have already recovered, is one reason investors end up underperforming the market.
The long-term return of the S&P 500 has averaged 10% annually since its launch in 1957, even if the path was bumpy. "We tell clients it's all about time in the market, rather than trying to time the market," says Howarth.
Because of this, the most successful investors are usually the least active. One Fidelity study found that some of the firm's top-performing accounts belonged to investors who had left their portfolios completely alone because they had either forgotten about them or had even passed away.
In the end, the answer to market volatility is not reacting emotionally or constantly adjusting an investment strategy. Instead, retirees need a long-term financial plan designed to cover their income needs and address the top risks in retirement.
The multiple risks for a retirement plan
Market downturns are an important risk for retirees, but they are only part of the story. Retirement portfolios must be designed to navigate several challenges at once. Moves that reduce short-term market risk can create long-term problems.
Market risk (and what drives markets). To start, consider what drives market risk in general. “Returns are driven far more by fundamentals such as earnings, dividends, valuations and inflation,” says Norton from Empower. “It's not that current conditions don't matter, but these long-term factors matter more.”
Norton draws an important distinction between downturns driven primarily by investor emotions and those rooted in deeper economic problems that hurt underlying company valuations.
The COVID crash in 2020, for example, was largely driven by fear and uncertainty surrounding the pandemic. Because the underlying financial health of most companies remained strong, markets rebounded quickly once that panic eased.
The 2008-2009 financial crisis reflected deeper structural problems in the economy, including large amounts of bad debt and a breakdown in credit markets, which is why it took so long for stocks to recover; companies had to rebuild.
Today's environment may contain elements of both, suggests Norton. Economic pressures such as tariffs and rising oil prices are affecting companies' financial outlooks, while political tensions may amplify investor anxiety, leading to overselling.
Since markets may be reacting to both factors, Norton says retirees are better off sticking to a balanced, long-term investment approach rather than guessing which way stocks will move next.
Sequence-of-returns risk. Market downturns are inevitable during a long retirement, but the timing of those losses matters. This is known as the sequence-of-returns risk.
Selling shares during a downturn leaves fewer assets to benefit from a market rebound. "It's one of the biggest risks retirees face," says Howarth, the adviser in Connecticut. "If you experience significant losses early in retirement, it can be very difficult for the portfolio to recover fully."
Investors who are still working can ride out losses by continuing to save and waiting for markets to recover. Retirees face a different dynamic once withdrawals begin.
With today's heightened uncertainty, retirees need to find ways to meet income needs while ensuring the portfolio lasts into the future.
One option is to cover essential expenses during market downturns while delaying discretionary spending such as travel, home renovations and other large purchases.
Another strategy is a bucketing approach. Retirees set aside one to two years of spending needs in cash while leaving the rest of the portfolio invested for long-term growth. If markets decline, retirees can draw from those reserves instead of selling stocks at depressed prices.
Nandan Rao, a 66-year-old retired DuPont researcher in Delaware, has found bucketing to be a valuable investment strategy not only for covering his bills but also for taking advantage of market conditions. "I try to keep a few hundred thousand in cash to make purchases when the market looks good. It's helped me land some real bargains." Retirees who did not establish a bucket strategy earlier can still begin building one by directing portfolio income into cash reserves while temporarily reducing withdrawals. "The goal is to structure the portfolio so you're not forced to sell during a downturn," says Howarth.
Inflation risk. Given today's environment, it may be tempting to reduce market exposure by shifting more savings into cash, government bonds and other guaranteed assets.
But retirement portfolios still need to generate income that keeps pace with rising prices. Inflation remains elevated by recent historical standards, and it could climb further if rising oil prices and tariffs push costs higher.
Even moderate inflation can steadily erode purchasing power for portfolios that rely too heavily on cash or low-yield investments. Inflation is "always a stickier problem than people want to think about," says Armstrong, the active investor in Pittsburgh.
While stocks carry more short-term risk, they have historically delivered long-term returns well above inflation. The S&P 500's inflation-adjusted return since 1957 has been roughly 6.69%, helping portfolios maintain their purchasing power over time.
The challenge is balancing that long-term growth with the need for reliable income during market swings. One possible solution is to emphasize dividend-paying stocks, says Daniel Milan, the investment adviser from Michigan. Blue-chip companies like Best Buy, HP, Kraft and Pfizer may not offer the same growth potential as tech stocks or small-cap firms, but they pay out more reliable dividend income.
Unlike stock prices, which can fluctuate significantly from day to day, the dividends paid by these established companies tend to be far more stable, remaining the same or even growing when market conditions are rocky. “If you can model your dividend portfolio to generate enough monthly income to cover household needs, you won't be forced to sell shares,” Milan says.
Longevity risk. Retirees must also remember that their portfolios may need to generate income for decades. Roughly one out of three 65-year-olds today will live until at least age 90, according to the Social Security Administration.
That means they'll need a portfolio that continues to grow so it can last for a long, long time. But relying entirely on stock market withdrawals can create problems during inevitable downturns, when selling shares may lock in losses. One way to reduce that risk is by building multiple layers of income into a retirement plan.
Social Security provides one stream of guaranteed retirement income unrelated to market performance. Pensions serve a similar role for those who have them. Additional stability may come from bonds and annuities that generate predictable income. Annuities, in particular, can help retirees avoid outliving their savings, as these insurance contracts can be structured to provide guaranteed income for life.
With the essentials covered by more predictable income sources, retirees can feel more comfortable keeping part of their portfolio invested in stocks to support long-term growth and discretionary spending, even when markets are volatile.
Milan compares retirement planning to running a business. "The key question becomes cash in versus cash out." How much income is coming in each month, and how much needs to go out to cover spending? If the income covers expenses, swings in portfolio balances matter far less.
Sticking with a long-term strategy
"One emotional response can set back a lifetime of hard work and saving." — Julian Morris
The best approach for a stressful 2026 may be the simplest: Maintaining the same long-term investment habits as any other year. For Rao, the retired Dupont researcher, that mindset has been shaped by a full career of investing through market cycles. "I don't react to these market downturns or even upturns on a whim," he says, even through the pandemic crash. "I just held, and of course it recovered in a big way."
Rather than trying to predict where markets will move next, Rao focuses on maintaining a diversified portfolio, developed with his financial adviser, to support his spending needs while still providing long-term growth.
For those building their own portfolios, one simple guideline for balancing growth and stability is the "Rule of 120." Subtract your age from 120 to estimate the percentage of a portfolio that should be invested in stocks for growth, with the remainder allocated to bonds and other safer assets. Under this rule, a 70-year-old investor would hold about 50% in stocks, with the remaining 50% in bonds and other safer investments.
From there, investors could set a rebalancing schedule of adjusting only once or twice a year. Over time, strong performance in one sector or asset class can leave a portfolio more concentrated than intended. For example, a strong bull market might push a portfolio from a 50/50 stock-bond mix to a 60/40 mix. Rebalancing would involve trimming stocks and adding to bonds to return to the original target.
The key is then to rebalance according to your planned schedule, rather than in response to short-term market conditions. Rao follows that discipline. He says he and his adviser review the portfolio semi-annually and rebalance only then.
Above all, retirees should avoid making major financial decisions during moments of market stress. Setting personal guardrails ahead of time can help investors pause before reacting emotionally during a downturn.
Investors who feel the urge to sell during a market decline may benefit from discussing the situation with a financial adviser, a family member or a close friend before taking action. “Sometimes you need to give yourself a breather. If it's important today, it'll still be important tomorrow,” says Norton.
Vanguard research has found that one of the greatest values advisers provide is behavioral coaching, helping investors avoid costly buy-and-sell decisions during volatile periods.
Says Morris from Concierge Wealth Management: "One emotional response can set back a lifetime of hard work and saving."
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.
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