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A run of falling weeks is not, by itself, a reason to sell, buy, or change your investments. First check when you will need the money, whether your portfolio still matches your goals and risk tolerance, and whether you are reacting to a plan—or to the latest headline. This is general U.S. investor education, not individualized financial, tax, or legal advice.
What should you do first?
Pause before trading and review your own circumstances. The SEC’s Office of Investor Education and Advocacy says, “While we can’t tell you how to manage your investment portfolio during a volatile market, we are issuing this Investor Alert to give you the tools to make an informed decision.” Its guidance, Things to Consider Before You Make Investing Decisions, emphasizes reassessing your financial situation, goals, time horizon, and risk tolerance.
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- What is this money for, and when do you expect to use it?
- Could you tolerate a further decline without having to sell to cover expenses?
- Has your financial situation or goal changed, or has only the market price changed?
- Does your current mix of investments still reflect the allocation you chose for that goal?
A falling market does not reveal when prices will turn around. Avoid treating the number of down weeks as a forecast or as a personal instruction to trade.
Does your time horizon or cash need change the decision?
Money you expect to spend soon has a different job from money invested for a long-term goal. FINRA notes that investors who need liquidity in the near term may need a different approach from investors who do not need cash right away. The SEC likewise describes time horizon and risk tolerance as factors in choosing an asset allocation. Do not assume that money needed soon can safely remain exposed to volatile stocks.
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Check whether you have accessible cash for expected expenses and emergencies. A joint SEC, CFTC, FINRA, NFA, and NASAA bulletin dated October 3, 2022, offers three to six months of living expenses as an example emergency-savings goal—not a universal requirement. The bulletin also warns that margin, some options strategies, and short selling can produce losses beyond the amount invested. Read it at Investor Bulletin: Be Prepared for the Unexpected.
Is your portfolio diversified and still aligned with your plan?
Look beyond the headline index or the number of funds in your account. Diversification means spreading investments across and within asset categories; owning several investments that focus on the same narrow area may still leave you concentrated. Check what funds actually hold and compare your current mix with the allocation you selected for your goals and ability to take risk. Investor.gov explains asset allocation, diversification, and rebalancing, including why a narrowly focused mutual fund or ETF may not provide broad diversification. The SEC’s Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing provides additional context.
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When does rebalancing make sense?
Rebalancing means bringing a portfolio back toward an allocation chosen in advance after market movements have caused it to drift. It is not a general rule to buy whatever has fallen, nor a way to predict the bottom. The SEC describes both calendar-based reviews and threshold-based approaches; it does not prescribe one schedule for everyone. If you rebalance, consider the account rules, possible taxes, and transaction costs before acting, since the cited SEC guidance does not provide personalized instructions for those details.
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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteSome investors use dollar-cost averaging—investing equal portions at regular intervals—as a way to follow a consistent schedule rather than react to market swings. FINRA describes the method in its tips for turbulent markets. It does not guarantee against losses, and it is not a reason to invest money that you may need soon.
Should you sell or change your risk level?
A decision to reduce risk may be reasonable if your goals, time horizon, financial capacity, or willingness to tolerate volatility have changed. Make that reassessment deliberately, rather than because several weeks were negative. A less volatile mix can also change the portfolio’s potential returns; no allocation removes investment risk.
Before selling, consider whether the move would leave your portfolio better matched to your actual needs or merely lock in a fear-driven reaction. The SEC’s January 29, 2021 alert on volatile-market behavior warns that short-term trading, following trends, and trading on market “noise” carry significant risks. Read The Risks of Short-Term Trading in Volatile Markets.
What should you avoid during a prolonged decline?
- Impulse trades: Do not let a single headline, social-media post, or streak of down weeks substitute for a review of your plan.
- Leverage and complex bets: Margin and options can magnify losses; short selling can expose you to losses beyond the amount invested. Make sure you understand the risks before using them.
- Guaranteed-return pitches: Treat promises of guaranteed returns as a warning sign. FINRA’s turbulent-markets guidance also recommends checking a financial professional’s registration through BrokerCheck. Registration does not guarantee good advice or a particular investment result.
When should you seek personal guidance?
If a decision affects money you need soon, involves a complex strategy, or has significant account or tax consequences, check your account terms and consider speaking with a qualified financial professional. You can use BrokerCheck to review a professional’s registration, but that check is not an endorsement and cannot predict the quality or outcome of advice. For a consequential trade, make sure you understand its costs, risks, and fit with your overall plan before proceeding.
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