Five key strategies for navigating market volatility

Market fluctuations can create uncertainty, leading some investors to let their emotions drive their investment decisions. Although selling when markets are down, in an attempt to sidestep losses, may make one feel good in the short term, it is difficult to find the right time to get back into the market. History has shown that missing just a handful of the best days in the market can have a significant impact on the long-term returns of your portfolio. Instead of reacting impulsively, a strategic approach can help investors stay on track.

Here are five key strategies to consider while navigating the market:

1. Staying invested matters

Attempting to predict market lows and highs often results in missing key rebound opportunities. Historically, the first year following a market downturn has yielded substantial returns for those who remained invested. However, missing even a few strong market days can drastically reduce overall gains. Remember, it’s about time in the market, not timing the market.

As the chart below shows, missing just the best 10 days can almost cut your return in half. Missing the best 40 days delivers a negative rate of return, where those who stick it out have an average rate of return of 10.4%. It is also important to know that many of the very best days come during times when the market is in a downturn.

Source: Guide to Retirement, J.P. Morgan Asset Management, 2025

2. Utilize a consistent investment strategy

Rather than reacting to short-term volatility, dollar-cost averaging can help smooth out market fluctuations. This strategy involves investing a fixed amount at regular intervals, allowing you to buy more shares when prices are low and fewer shares when prices are high. Over time, purchasing shares at differing prices can result in a lower average cost per share. This approach allows you to stay on strategy and avoid focusing on short-term market swings.

3. Diversification helps manage risk

Spreading investments across different asset classes, regions, and sectors can help reduce overall risk. Market conditions affect various investments differently and maintaining a well-balanced portfolio can provide stability during periods of volatility. After the Fed’s extreme rate hiking cycle in 2022 led to large losses for fixed income, many investors have questioned the role of bonds in a portfolio. However, with yields now at elevated levels, bonds provide investors with much higher income generation while providing diversification from equities. To ensure your portfolio is aligned with your financial goals and risk tolerance, it’s important to regularly review your portfolio, understand what you own, and adjust your allocation based on your individual time horizon.