- Volatile markets saw average intra-year drops of 13.8% from 2000 to 2019, yet 75% of those years ended in gains.
- Behavioral studies show investors often underperform the market due to emotional decision-making.
- DALBAR research reveals the average investor earned only 2.9% annually vs. the S&P 500’s 7.7% over 20 years.
- Las Vegas home prices have risen over 150% in 10 years, making real estate a potential buffer during downturns.
- Tax strategies like 1031 exchanges and tax-loss harvesting can improve returns during volatile periods.
When the stock market gets turbulent, it often causes strong emotions—from anxiety to outright panic. But acting quickly during times when the market is swinging a lot can hurt your long-term investment plan. Instead of giving in to fear, smart investors use these times to improve, rebalance, and diversify. In this guide, we’ll look at how to deal with market uncertainty, avoid expensive mistakes, and possibly protect your investments with things like real estate—especially in good markets like Las Vegas.
Understanding Market Volatility
Market volatility means how often and how much prices move in financial markets over a certain time. When markets swing a lot, the prices of stocks, bonds, or other investments can go up or down fast in a short time.
What Causes Market Volatility?
Volatility can be triggered by many things
- Economic indicators: Changes in GDP, unemployment rates, inflation data, etc.
- Interest rate policy: Decisions by the Federal Reserve often cause shifts.
- Corporate earnings: Poor earnings from major companies can shake confidence.
- Geopolitical tensions: Conflicts or international disputes influence global trade and financial stability.
- Unexpected events: Natural disasters, pandemics, and more can cause uncertainty.
These things change how investors feel. That causes prices to swing as people buy or sell based on risks or chances they see.
Volatility Is a Normal Occurrence
History proves that volatility is not only normal—it’s expected. For example, from 2000 to 2019, the S&P 500 saw average drops of 13.8% within a year. Despite those sharp drops, the market still closed positively in 15 out of 20 years (J.P. Morgan Asset Management, 2020).
This shows something important: even with many market dips, long-term investors can still make money if they stay with their plan.
Investor Psychology: Why Panic Rarely Pays Off
Investing is as much a mental game as it is a financial one.
Behavioral Biases That Hurt Returns
Two strong psychological biases often show up during downturns
- Loss Aversion: This idea shows that people feel the pain of loss nearly twice as much as the pleasure of gains. This fear may lead to irrational selling.
- Recency Bias: Investors tend to focus too much on what happened recently, forgetting history and long-term data.
During the COVID-19 crash in March 2020, markets fell over 30% in just weeks. Many investors, overcome by fear, sold their assets. Yet by summer, those same markets had come back up a lot. Those who left during the panic locked in losses and missed the recovery (Morningstar, 2021).
Emotional Investing vs. Strategic Investing
Quick, emotion-driven decisions usually mean buying high and selling low—making it harder to build wealth. A good investment plan is based on discipline, not emotion.
Do NOT Do These Things During a Market Dip
Making the wrong moves during a downturn can really hurt how much money you make.
Don’t Sell Out of Fear
Selling at a loss makes a paper loss into a real one. Once you sell, you miss the recovery that history shows follows most downturns.
Don’t Move Everything to Cash
While cash may seem safe, it usually doesn’t keep up with inflation. You also miss out on earning returns on returns while sitting on the sidelines.
Don’t Try to Time the Market
It’s nearly impossible to always guess market highs and lows. A DALBAR study found that the average investor earned just 2.9% a year between 2001 and 2020, while the S&P 500 returned 7.7%—mostly because timing strategies had bad results (DALBAR, Inc., 2021).
What Smart Investors DO Instead
Experienced investors take advantage of downturns instead of fearing them. Here’s how
Stay Invested
History shows that markets reward patience. The biggest up days often come right after big down days. Missing just the 10 best days in a 20-year period can erase a big part of your returns.
Rebalance Your Portfolio
Use volatility as a check-in moment. Rebalancing makes sure your mix of assets keeps matching your goal mix and how much risk you can handle.
Buy the Dip
If you have extra cash and plan to invest for a long time, buying during a downturn can offer a good chance to make money. Many great companies trade at discounts during market panics, giving chances to buy for long-term investors.
Focus on Fundamentals
Volatility hides the real value. Ignore things happening in the short term and focus on how well your investments can do over time. Companies and assets with strong fundamentals are likely to do well.
Diversification: The Unsung Hero in Times of Crisis
Diversification means spreading your investments across different types of assets to lower overall risk.
Why Diversification Works
Different assets often react differently to the same economic event. For example, while stocks may fall during a recession, things like gold or real estate might stay steady or even go up in value.
Types of Assets to Diversify With
- Stocks: High growth, high risk.
- Bonds: Give income and stability.
- Commodities: Like gold or oil, they offer protection against inflation.
- Real Estate: Physical things that make income and don’t move with the stock market.
When stocks suffer, real estate and bonds often help smooth out swings in your investments.
Spotlight: Why Las Vegas Real Estate Can Be a Safe Haven Investment
When market swings go up a lot, many investors switch to hard assets like real estate—especially in cities likely to grow over time.
Las Vegas as a Strategic Real Estate Market
Steve Hawks, a top Las Vegas real estate expert, notes that economic dips often make people want to invest in property in the area more. Here’s why Las Vegas shines
- Post-2008 and post-COVID rebound: Las Vegas real estate came back strong after downturns. This was helped by many people moving there and strong tourism.
- Population Growth: People move to the area because it’s affordable, has tax advantages, and a good lifestyle.
- Tourism and Jobs: As a global entertainment center, Vegas does well because its hospitality economy bounces back well.
- Home Price Growth: Average home prices have gone up 150% over the past 10 years (Las Vegas Realtors, 2023).
Real estate offers stable income through rent, long-term increases in value, and diversification away from stock markets that can be hard to predict.
Active vs. Passive Strategies During Market Volatility
Choosing between “doing something” and “doing nothing” is a common investor question.
Passive Strategy: Stay the Course
- Keep putting money into your 401(k) or IRA.
- Use dollar-cost averaging, buying more during dips.
- Stick to your original financial plan.
Active Strategy: Adjust and Refocus
- Sell assets not doing well or not matching your plan.
- Put new money into areas priced low, like sectors doing poorly or real estate.
- Look for assets that don’t swing as much, like properties that make income.
Real estate lets you do both in a special way: it’s a long-term way to make money without much work, but you can actively manage or change your property plan based on the market.
Tax Strategy Considerations During Downturns
Don’t miss the tax benefits when the market swings a lot.
Tax-Loss Harvesting
Selling investments at a loss can create tax write-offs. These can cut down gains in other parts of your investments or even lower your regular income (up to $3,000 a year).
Real Estate Depreciation
Investment properties get depreciation, which can lower the taxes on rental income even while your property goes up in value.
1031 Exchange: A Real Estate Bonus
Used correctly, a 1031 exchange lets you reinvest the money from one property into another, putting off capital gains taxes. This can be a good way to sell assets that swing a lot and put money into more stable real estate chances.
When to Seek Professional Help
Trying to deal with market swings alone can be overwhelming. This is where skilled financial advisors and real estate professionals become valuable.
Steve Hawks helps investors
- Move from stocks to real things you can touch, like real estate.
- Look at market trends for chances to buy or sell.
- Get the most from tax plans like 1031 exchanges.
- Move money from assets not doing well, such as 401(k)s, into more stable options.
A professional can build a plan just for you that matches your goals, how much risk you can handle, and your timeline—especially when looking for chances in areas growing fast like Las Vegas.
Real Stories: What Steve Hawks’ Clients Did Right During Downturns
Stories show how helpful it is to act with a plan during downturns, not emotionally.
Early 2020: Pivot to Vegas Properties
Several clients moved some of their investments into Las Vegas real estate just before the COVID-19 rebound. Their results included
- Significant value increase in property values.
- Steady rental income, even when the economy was uncertain.
- Different types of investments, relying less on the stock market.
These stories show an important lesson: market swings don’t always mean pulling back—they can be a chance to make your investment approach stronger and bigger.
Make Your Strategy Stronger, Don’t Leave It
Volatile markets are going to happen. How you react to them can either hurt or help your investments.
The smart move is often to stay calm, avoid quick decisions, and use these times to look at your overall investment plan again. Whether it’s rebalancing, moving some money to real estate, or getting the most out of your taxes, every crisis has opportunity.
In cities like Las Vegas—with lasting demand, strong rental markets, and a good chance to make money over time—real estate could be a way to protect yourself. With expert help from people like Steve Hawks, you can turn market swings into a way to build financial strength.