The rollout of President Donald Trump’s tariffs sent the market reeling over the past week – but the best move for those with a long-term focus might be to sit tight. Between the close of April 2 and this Tuesday, the Dow Jones Industrial Average tanked more than 4,500 points as markets sold off after Trump announced his “reciprocal” tariffs. After the president announced a 90-day reprieve on some of those high duties , the 30-stock index surged more than 2,900 points on Wednesday – up 7.87% for its biggest gain in one day since March 2020. Was there money to be made for those with perfect timing during Wednesday’s rally? There may have been if you bought and sold at exactly the right moments. But if you’re investing for years to come, it’s best to avoid knee-jerk reactions and remember your long-term objectives, financial advisors said. “This will be the textbook example of why you stick to your plan,” said Blair duQuesnay, certified financial planner and financial advisor at Ritholtz Wealth Management. “Who knows where we go from here, but if you take the market movement, this emotional roller coaster, at the end of the day the answer was there all along: All you had to do was stick to your plan,” she added. Take a breath and review your goals To keep a cool head in turbulent times, investors need to have a long-term financial plan and ensure that their asset allocations reflect those goals. While a portfolio that’s heavily skewed toward stocks may have the best growth prospects, it will be subject to periods of heightened volatility. A Vanguard analysis of calendar-year returns from 1926 to 2022 of portfolios ranging from 100% bonds to 100% stocks found that the average annual return from an allocation to only equities would result in an average annual return of 10.2% but the range of outcomes could vary from a loss of 43.1% to a gain of 54.2%. A 50/50 allocation, however, had a calendar-year return range of 32.3% to -22.5% — and it posted an average annual return of 8.1%, Vanguard found. While investors are happy to take the ride up – like the S & P 500 ‘s back-to-back surges of more than 20% in 2023 and 2024 – they may find themselves wanting to flee for the exits when things slide. “They came off two years of strong equity returns, so even before this turmoil, we’ve been talking about interest rates being higher and how you can get a decent return from fixed income,” said Rafia Hasan, CFP and chief investment officer of Perigon Wealth Management. Even near-retirees were able to capture the benefit of higher yields on fixed income and boost their portfolio returns without taking excessive equity risk, she added. “In some cases, there was [fear of missing out]: ‘I missed out on those strong market returns we got in 2024 because I started paring back portfolio risk,'” she said. “Now you see why you did it.” You should also consider whether you’re making the best use of your short-term cash. Right now, investors are getting paid to hold funds for emergencies or redeployment into the market: The Crane 100 Money Fund Index has an annualized seven-day yield of 4.14%. Just make sure that you have a plan for those funds, too. A client recently approached Rachel Elson, CFP and wealth advisor at Perigon, to ask about redeploying “extra cash” back into the market – and had to be reminded that that money was earmarked for an upcoming bathroom remodeling project. “We can say that you have this much in cash, but they must understand what their reserves are, what’s the goal of this money and the endgame,” she said. “Don’t invest the money you’ll need in the next six months [in stocks].” A rule of thumb is to have at least three to six months of expenses saved in accessible cash for emergencies. ‘Sequence of returns risk’ ” Sequence of returns risk ” is a consideration for investors who are ready for retirement. This risk refers to the negative impact savers might see when they begin withdrawals from their retirement funds while simultaneously earning poor market returns. Ultimately, this could result in a portfolio that doesn’t last as long as a retiree may need since they end up with fewer assets to generate growth. Provided they are working with a financial advisor and already have a plan in place, one option for these older investors might be to consider avoiding an inflation adjustment as they draw down from their retirement savings that year, according to Jeffrey Levine, CFP, CPA and chief planning officer at Focus Partners Wealth. This way, they keep a lid on withdrawals as the market falls, which may extend the lifespan of their portfolios. A tweak like this in the early years of retirement can help investors avoid making dramatic overhauls of their portfolios, and it offers them a modification that they can live with while the market sorts itself out. “There are a lot of situations where people who are early in retirement might be better off mathematically doing that versus chopping their spending by 30%,” Levine said. Finding silver linings Downturns aren’t always bad news for investors. For starters, they’re a way to buy stocks on the cheap . They’re also a means for tax-loss harvesting: A move that involves selling losing positions in a taxable portfolio and then using these losses to offset capital gains elsewhere. Just be sure to avoid breaking the wash sale rule, which prevents investors from taking the tax break if they buy an asset that is “substantially identical” to the one they dumped within 30 days before or after the sale. You can also bulk up on contributions to tax-advantaged accounts, if you have room in your cash flow to do so. “If you haven’t funded your health savings accounts or your 529 college savings plan, now is a good time to deploy cash,” said Levine. “You can beef up contributions to your 401(k) plan.”
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