By Jeff Weeks, CFP®

After a torrid start to 2025, the US stock market has given back most gains in February. Recent volatility has led some to question if the bull market that began in October of 2022 is coming to an end. I long ago gave up trying to outsmart the market, but I have learned over the years that it's during uncertain times that adhering to a disciplined investment approach becomes essential.

At ATX Portfolio Advisors, we believe in guiding investors through market ups and downs with evidence-based investing strategies. As a fiduciary advisor, my main concern is keeping clients focused on their long-term financial goals rather than reacting emotionally to short-term fluctuations.

Understanding Market Volatility

Market volatility refers to frequent and significant price movements in financial markets. While sudden drops can be unsettling, it’s important to remember that volatility is a natural part of investing. Indeed, we should anticipate occasional volatility. The current drawdown of around 3% from recent highs for the S&P 500 has been very normal market behavior. Consider the following:

Since 1950: The S&P 500 has had a correction of 10% or more approximately once every 1.5 years on average.
Since 1980: There has been an average intra-year decline of about 14%, meaning double-digit pullbacks are quite common even in strong market years.
Bear Markets (drops of 20%+): These occur roughly every 6 years on average.

Despite the temptation to predict the market's direction, even the most experienced investors have found success elusive in practice. That is due to market volatility working in both directions. As quickly as markets drop, they can unexpectedly rise as well. Those increases frequently occur in short bursts, as evidenced in Exhibit 1.

Exhibit 1. The Cost of Trying to Time the Market

The impact of being out of the market for a short time can be profound, as shown by this hypothetical investment in the Russell 3000 Index, a broad US stock market benchmark.
• A hypothetical $1,000 investment made at the beginning of 2000 turns into $6,604 for the 25-year period ending December 31, 2024.
• Miss the Russell 3000’s best week, and the value shrinks to $5,511. Miss the best three months, and the total return falls to $4,655.
• There’s no proven way to time the market— targeting the best days or moving to the sidelines to avoid the worst. Staying invested and focused on the long term helps to ensure that you’re in position to capture what the market has to offer.
Source: Dimensional Funds Advisors

Instead of trying to outguess the markets’ direction, at ATX Portfolio Advisors, we seek to use diversification to capture what Nobel laureate Harry Markowitz referred to as “the only free lunch in investing.”. It is important to remember that diversification doesn’t guarantee short-term comfort—it can provide long-term resilience, however.

Many investors abandon certain asset classes when they underperform for extended periods. But this is the price we pay for long-term success. The very nature of diversification means that not everything will be "winning" at the same time.

The Role of a Disciplined Investment Approach

In times of volatility, a structured investment strategy is your best defense. Here’s how a disciplined approach can help:

1. Staying the Course

Reacting emotionally to market swings often leads to poor investment decisions, like selling (or buying) at the wrong time. As a financial planner, I emphasize the importance of sticking to your long-term plan instead of chasing short-term market trends.

2. Diversification – Even When It Feels Uncomfortable

A well-diversified portfolio reduces risk exposure. True diversification means accepting that some holdings will lag for long stretches. As a 30-year industry veteran, every decade has had some previously hot asset trail nearly every other only to see the trend reverse in the next decade. It can be very lonely extolling the benefits of diversification, at times.

For example, value stocks or international equities may underperform US large-cap stocks for years, only to later outperform when conditions change. (See last month’s Accountable Update for illustrations.) The key is patience and perspective—abandoning diversification at the wrong time can lead to missed opportunities.

In addition to different types of stock exposure, we believe in using many asset types such as bonds, cash, real estate, private debt, private equity, reinsurance, commodities, currencies, and even fine art as pieces of broadly diversified portfolios.

3. Regular Rebalancing

Market movements can shift your portfolio's level of exposure to different risks. Regular rebalancing helps maintain alignment with your financial goals and risk tolerance, ensuring you're not overexposed or underweighted to any asset class.

What Can You Do Today?

If you’re concerned about market volatility, consider what you can control:

Review Your Financial Plan – Ensure your investment strategy aligns with your risk tolerance and long-term goals.
Work with a Trusted Advisor – Okay, I’ll admit this is self-serving, but a fee-only fiduciary advisor will provide advice that puts your interests first.
Focus on Long-Term – Short-term volatility is less impactful when viewed in the context of your long-term financial success. Investments that are made for your long-term future shouldn’t be managed with that time horizon in mind. If you think the funds will be needed sooner than later, they probably shouldn’t be invested in volatile assets in the first place.

Final Thoughts

Market volatility is a challenge, but it doesn’t have to derail your financial future. By sticking to a disciplined investment approach, diversifying wisely (even when it’s uncomfortable), and avoiding emotional reactions, you can navigate uncertainty with confidence.

As an fee-only financial planner, my goal is to help clients make informed financial decisions based on evidenced-based investment strategies. If you’d like to discuss how to optimize your portfolio for long-term success, reach out to ATX Portfolio Advisors for a consultation.

^{Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. In USD. For illustrative purposes. Best performance dates represent end of period (November 28, 2008, for best week; April 22, 2020, for best month; June 22, 2020, for best three months; and September 4, 2009, for best six months). The missed best consecutive days examples assume that the hypothetical portfolio fully divested its holdings at the end of the day before the missed best consecutive days, held cash for the missed best consecutive days, and reinvested the entire portfolio in the Russell 3000 Index at the end of the missed best consecutive days. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value Dimensional Fund Advisors does not have any bank affiliates.}