IF YOU opened an investment or brokerage statement – or even just glanced at a headline – in the past few weeks, you probably felt your stomach drop. Red arrows dominated the screen, and phrases like reciprocal tariffs, bear market, inflation and recession odds have crowded the news. It’s unnerving. For those at the cusp of retirement – or already living on the nest egg they spent decades building – it can feel existential.

The numbers look harsh on paper, but the psychological impact is even harsher. To the average person, a 15 per cent slide in the S&P 500 translates into postponed travel plans, a downsized gifting budget for grandchildren, or a longer time in the workforce than expected. The anxiety may cause some to panic and change course. Yet history, market mechanics and a few basic rules of thumb all suggest that the best response is usually the one that feels hardest in the moment: keep calm and act rationally.

Why downturns hurt so much

Human beings are wired to respond to threats with either fight or flight. We see a line going down and instinctively think, I have to act now before it is too late. Add social media feeds and 24-hour business news, and the noise becomes deafening.

Psychologists call this phenomenon “loss aversion”. We feel the pain of a dollar lost doubly more intensely than the pleasure of a dollar gained. That skewed perception tempts even seasoned savers to sell at the worst possible moment, crystallising a paper loss into a permanent one.

The silver linings nobody talks about

Here is what rarely makes the evening news: Despite the bruising price action, the financial system looks far healthier than it did during the 2008 global financial crisis.

• Well-capitalised banks: Large institutions enter the current slump with more capital, tighter underwriting standards, and far less exotic leverage than 15 years ago. That cushions the broader economy from a credit freeze.

• A vibrant private-credit market: Over the last decade or so, non-bank lenders have stepped in to provide financing to companies that once relied exclusively on banks. For investors, that translates into more diversified sources of yield.

• Policy “dry powder”: Many governments still have room – politically and fiscally – to roll out targeted stimulus or liquidity facilities if conditions deteriorate further. Central banks, though keen to tame inflation, also retain tools to stabilise dysfunctional markets.

These structural buffers do not eliminate volatility, but they lower the odds of systemic failure – the kind that can turn a routine bear market into a generational collapse.

Lessons from past crises

Look back at any major downturn – 1987’s Black Monday, the dot-com bust, 2008’s meltdown, the 2020 pandemic shock – and a pattern emerges. Markets often overshoot on the downside, recover in unpredictable bursts, and eventually reach new highs. Consider these facts:

• From 1980 through 2023, the S&P 500’s average intra-year drop was roughly 14 per cent, yet the index finished positive in 33 of 44 calendar years.

• Missing just the ten best single days over the past two decades would have cut a fully invested portfolio’s total return by more than half. Those best days were typically clustered within weeks –sometimes within hours – of the worst days.

Timing those whiplash rallies is almost impossible. Long-term investors who stayed invested were rewarded; traders who tried to dodge every downdraft rarely fared better and often did worse.

A practical playbook for investors

1. If you are fully invested: Stay calm and stay diversified. Make sure your mix of stocks, bonds and cash still matches your time horizon and risk tolerance but resist the urge to overhaul everything. Rebalance, don’t retreat!

2. If you hold excess cash: Patience is a position. Keep powder dry until the economic picture clarifies, then phase money in methodically – say, monthly over six to 12 months – rather than in one dramatic leap. That discipline removes guesswork and emotion.

3. If you need income: There seems to be consensus among many chief investment officers on short duration treasuries, Tips (Treasury Inflation-Protected Securities) or opportunities on yield products. Talk through the menu with a qualified adviser; there is no one-size-fits-all formula.

Filtering the advice firehose

The Internet democratised financial commentary. That is mostly good news: more voices, more ideas. But a TikTok clip or podcast episode is no substitute for a holistic plan that accounts for your liabilities, tax bracket and estate goals. Use digital content for education, not execution.

A balanced approach might look like this:

• Listen widely: Compare perspectives from economists, portfolio managers, and yes, even your favourite YouTube hosts.

• Verify independently: Cross-check claims against reputable info and data sources such as trusted sources or established research houses.

• Consult professionals: A credentialled adviser or a fiduciary planner can translate macro chatter into concrete portfolio moves tailored to you.

Think of it as assembling a medical team. You would not crowd-source a cancer treatment plan from social media; you would seek a second opinion from a specialist. Your life savings deserve the same rigour.

Mind the behavioural traps!

Beyond loss aversion, several cognitive biases plague investors during volatile stretches:

• Recency bias: Overweighting the latest headline and assuming today’s trend will last forever.

• Confirmation bias: Seeking out commentary that validates your fear or euphoria while ignoring dissenting views.

• Herding: Copying what friends, colleagues or strangers on a Reddit forum are doing, even if their circumstances differ wildly from yours.

Awareness is half the battle won. Before making any portfolio change, ask yourself: Am I reacting to data or to emotion? If the honest answer is emotion, step back. Sleep on it. Markets will still be there in the morning.

Building resilience beyond the portfolio

Financial security is not only about asset allocation. A few parallel steps can make the market’s mood swings easier to tolerate:

• Emergency fund: Keep three to six months of living expenses in a savings or money-market account. Knowing you can pay the bills without selling assets at a loss is liberating.

• Debt management: High-interest credit-card balances erode net worth faster than most investments can grow. Paying them down offers a guaranteed return.

• Flexible spending: Identify discretionary expenses – vacations, dining out, big-ticket purchases – that you could postpone if markets deteriorate. Having a contingency budget lowers stress.

• Health and wellness: Market volatility is a fact of life; chronic anxiety does not have to be. Exercise, sleep and hobbies provide mental ballast when CNBC’s ticker feels overwhelming.

The case for optimism

Bear markets often coincide with innovation spurts. The early 2000s tech wreck sowed the seeds for cloud computing and smartphones. The 2008-09 slump forced banks to rebuild capital and fintech startups to rethink payments. The pandemic crash accelerated digital health, remote work and supply-chain reshoring.

Today, despite trade and geopolitical tension, breakthroughs in artificial intelligence, renewable energy and biotechnology continue apace. Profitable companies adapt; new leaders emerge. For patient investors, downturns merely change the price of future growth, not the existence of growth itself.

A note to retirees and near-retirees

The risk to the sequence of returns from a retirement portfolio – the danger that a bad market early in retirement derails a portfolio – warrants special care. Strategies to mitigate it include:

• Bucket approach: Keep one to three years of withdrawals in cash-like instruments, the next five in bonds, and the rest in equities. When stocks fall, draw from the cash bucket, giving risk assets time to recover.

• Dynamic spending rules: Instead of a fixed or set per cent withdrawal, use a “guardrail” system that raises or trims annual withdrawals based on portfolio performance.

• Partial annuitisation: Converting a slice of assets into a lifetime income stream can cover essential expenses, reducing pressure to sell investments during bear markets.

These tactics are not one-size-fits-all, but they illustrate how planning – not panic – protects retirement dreams. Discuss your needs and come up with options with your wealth or fiduciary adviser.

The bottom line

Volatility is uncomfortable, but it is not new – and rarely permanent. Markets have weathered wars, pandemics, oil shocks and political crises. Over the long periods of history, they have rewarded discipline far more reliably than they have rewarded bravado.

So, as the headlines scream and charts zigzag, remember a simple mantra: Keep calm and carry on. Turn down the noise, lean on credible advice and stick to a plan aligned with your goals. Your future self will thank you.

This article is for informational purposes only and does not constitute individualised investment advice. Consult a licensed financial professional before making decisions that affect your portfolio.

The writer, CFA, CAIA, has 20 years of experience in investment advisory and wealth management in Singapore and globally. He has managed advisory teams covering UHNW investors and family offices. Passionate about innovation, productivity and sales uplift, he volunteers as a member of the CFA Society Singapore Advocacy Committee.