Riding the Waves: How to Think About Market Ups and Downs Like a Financial Advisor

Let’s be honest: market swings can be unsettling. Whether the headlines are celebratory or alarming, it’s easy to get caught up in the emotion of it all. But if you want to think like a financial advisor, it starts with one core principle: the market is a long game.

At Granite, we remind our clients that investing isn’t about reacting to news cycles. It’s about staying the course and making decisions grounded in goals, timelines, and thoughtful planning.

In this post, we’ll walk through why market swings are so emotionally challenging, what the stock market is actually good at, and how to ride the ups and downs – both practically and emotionally.

Why market ups and downs feel so hard

Most people feel the pain of a financial loss more strongly than they feel the pleasure of a financial gain. It’s due to a psychological bias called loss aversion, and it can be a major driver of reactive (and often unhelpful) investment behavior.

When markets are down, this bias is amplified by dramatic headlines (e.g., markets "slammed," "whacked," or "plunging") designed to grab your attention and stoke your fears. And, unfortunately, it works. Maybe you find yourself checking your accounts more often when things are going well, and avoiding them entirely when they’re not. Or, maybe you’re the type of person who can’t stop logging in when things feel scariest.

None of this is irrational. It’s human. But it can also produce results that don’t make sense in the long-run and have the potential to harm your financial goals.

Here’s the good news

The stock market isn’t designed for stability. It’s designed for growth over time.

And, historically speaking, that’s what it has delivered.

• While downturns vary in length, the average time it takes for the market to recover and reach a new high is just a few years (based on data going back to 1961), which isn’t a concern for long-term investments.
• A diversified equity portfolio helps reduce the impact of a downturn, and can still provide meaningful return on your investment when markets rebound.

And here's a mindset shift we often share with clients: there’s a difference between being "down" and losing money.

You only lose money if you sell when you're down. If you stay invested, you give your portfolio time to recover and potentially grow.

Investing tips for unpredictable markets

• Stay invested. “Timing” the market is notoriously difficult. Missing just a few of the market’s best days can significantly reduce your returns.

• Rebalance regularly. Over time, the investments in your portfolio will grow at different rates, which can throw off the original mix you chose. Rebalancing means adjusting your portfolio back to your target percentages, usually by selling some of what’s grown faster and buying more of what hasn’t. This keeps your risk in check and helps avoid having too much of your portfolio concentrated in just a few high-flying stocks. While technically possible to do on your own, most people benefit from having a financial advisor guide this process to ensure it's done thoughtfully and strategically.

• Diversify wisely. Diversification means spreading your investments across different types of assets so that no single company (or type of company) has too much influence on your portfolio. Some investments tend to stay steadier through all market conditions, while others are more sensitive to economic shifts but can offer greater growth potential. A healthy mix of both can help reduce dramatic ups and downs in your overall performance.

• Match investments to your time horizon. Assets earmarked for short-term needs should be more conservative than those intended for long-term growth (e.g., your retirement savings).

How to manage anxiety about the stock market

• Recognize your biases. Emotional reactions to market shifts are normal, but they shouldn’t drive your decisions.

• Stick to your plan. A good investment plan accounts for some market volatility. If your plan was sound during up markets, it’s still sound during down markets.

• Talk it out. Sometimes, the most helpful thing is having a third party – like a financial advisor – to help you stay grounded. We’ve been doing this for a long time and can help you keep perspective.

• Zoom out. Revisit our stat earlier in the article about the market’s historic performance. Looking at the big picture often makes short-term swings feel less threatening.

Being an investor during a downturn isn’t easy, but it’s where real returns are earned. The investors who can stay calm, stick with their strategy, and stay invested are often the ones who come out ahead in the long run.

And if you want some help removing emotion from your investment decisions, that’s one of the most important services we provide for our clients. Reach out with any questions - we are here and ready to help, regardless of what the market brings.