Why it's important to stay the course through market volatility

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No matter your investment time horizon, market volatility can make it difficult to stay calm if you’re invested in stocks and bonds. But that’s exactly what investors need to do during turbulent times.

Consider this: The S&P 500 (^GSPC) recorded its worst first 100 days under a new administration in more than 50 years, falling more than 7% from Inauguration Day on Jan. 20 to the market close on April 30. Yet, following news that China and the US had agreed to temporarily reduce tariffs, markets began to rebound, and the S&P recouped all its losses for the year and then some.

The worry about market volatility is valid, said Preston Cherry, author of "Wealth in the Key of Life" and CEO of Concurrent Wealth Management. He noted that tariffs can affect both consumer spending and long-term financial planning, making it more difficult to prepare for retirement.

Still, Cherry emphasized the importance of staying invested. “Don’t panic,” he said on an April 29 episode of Decoding Retirement (see video above or listen below). “I know that’s hard to do.”

Read more: How to protect your money during economic turmoil, stock market volatility

Investors who exit the market during downturns risk missing the recovery.

“At least some of your portfolio should be exposed to the market during those recovery days and periods after long-term shocks,” he said.

However, Cherry does not advocate for a rigid buy-and-hold strategy. Instead, he supports tactical flexibility. Investors can make “slight pivots,” such as raising cash or adjusting allocations, to manage risk in uncertain conditions.

“There is nothing wrong with making tactical shifts and raising some cash in order to help smooth out the sideways or bumpy ride in the economy for the next six to 18 months,” he said.

Having cash on hand can help investors avoid selling at a loss during downturns and provides flexibility without disrupting day-to-day living, he added.

Cherry also noted that down markets can open the door to strategic tax planning. For example, Roth IRA conversions may be more favorable when portfolio values are depressed. Tax-loss harvesting in taxable accounts can also help offset gains.

He also encouraged taking partial gains during strong markets, particularly in taxable brokerage accounts.

“Not all the gains, but some,” he said, “because it feels good to win a little bit.”

Another key point Cherry emphasized is to understand where you are on your retirement timeline. If you're within four to five years of retirement, either before or after, it's critical to revisit your investment strategy and risk tolerance.