Two Truths and a Lie About Market Volatility: How to Avoid Emotional Investing in Uncertain Markets

Market volatility has a way of getting our attention.

One day, the market is up. The next day, it’s down. Headlines warn of uncertainty. Commentators predict what might happen next. Before long, investors begin asking the same question:

What should I do now?

When markets become unpredictable, many investors feel pressure to react to every headline and market movement. That’s often when emotional investing begins to take hold. Decisions that were once guided by long-term goals can quickly become influenced by fear, uncertainty or the desire to avoid short-term discomfort.

While every market environment is different, two truths and one common lie consistently emerge during periods of uncertainty.

Understanding the difference can help you stay focused on what matters most.

Truth 1: Market volatility is normal.

Market ups and downs can feel uncomfortable, but they are a natural part of investing. Economic reports, geopolitical developments, interest rate changes and investor sentiment all influence short-term market movement.

The challenge isn’t avoiding volatility. The challenge is responding to it wisely.

Many investors feel pressure to make immediate changes when dramatic headlines dominate the news cycle. Yet investment decisions are generally most effective when long-term goals rather than short-term emotions guide them. Avoiding emotional investing means focusing on a disciplined strategy instead of reacting to daily market movements.

Truth 2: Successful investing begins with a plan.

When markets become volatile, investors are often tempted to abandon the strategies they developed during calmer times. But having a thoughtful plan in place before volatility occurs can provide direction when emotions run high.

That plan should reflect your:

• Risk tolerance
• Time horizon
• Financial goals
• Personal circumstances

A well-designed strategy isn’t built around next week’s headlines. It’s built around where you’re trying to go over the next several years and decades.

Lie: You need to predict what the market will do next.

This may be the most common investing myth of all.

When volatility increases, it’s easy to believe success depends on knowing when to get out of the market and when to get back in. But market recoveries often occur unexpectedly, and investors who attempt to move in and out of the market risk missing some of its strongest days.

Rather than trying to predict the future, stay focused on the principles you can control:

The Bottom Line

Market volatility may change from one year to the next, but the principles for navigating it remain remarkably consistent. Investors who recognize the risks of emotional investing may be better prepared to navigate uncertainty without abandoning their long-term strategy.

Expect volatility. Build a plan.

Ignore the lie that successful investing requires predicting what comes next. Instead, focus on what you can control: your goals, your risk tolerance, your long-term strategy and your commitment to faithful stewardship through every market season.

At GuideStone^®, we are committed to helping you navigate your journey to and through retirement — including through unpredictable times.

For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT. GuideStone members can evaluate their retirement portfolios today by logging on at MyGuideStone^®.