Fear can cause you to do strange things. When it comes to saving and investing, fear may cause you to make emotional decisions instead of rational ones.
Reacting emotionally to sudden market declines and increased volatility is natural, but that doesn’t mean you have no control. Having a long-term plan to guide you through the ups and downs of the market can help.
Fear is natural, but it’s not always healthy
Our emotions play a significant role in how we make decisions, including those related to savings and investing. Researchers have found that, when evaluating investment risks, we prefer avoiding loss to making gains. In fact, studies suggest that the negative feeling we experience when we lose something is twice as powerful as the positive feeling we experience when we gain something.
That “loss aversion” helps to explain the way some investors behave when the market unexpectedly takes a turn for the worse. Such events can trigger our fear of loss, causing the emotional side of our brains to compete with the rational side. The emotional side often wins—and that may mean making snap decisions to relieve stress. But, reacting that way may not set you up to reach your financial goals, like saving enough to retire the way you want.
For example, Fidelity Investments® found that investors who weathered the storm and stayed in the market during the financial crisis between 2007 and 2009 were far better off than those who sold their stocks.1
What you can do
Prepare yourself to weather market ups and downs by following a few steps:
- Consider how you’ve handled volatility in the past. Were you more or less risk tolerant than you thought you’d be? Knowing your tendencies may help you better prepare to deal with market fluctuations.
- Take another look at your investment strategy. Your investment strategy should reflect your retirement goals, financial situation, life stage and risk tolerance. For example, if you’re getting close to retirement, you may want to be a bit more conservative. If you’re young and just starting out, you may choose to take some risks and be a bit more aggressive.
- Make sure your asset allocation fits your risk tolerance. When you think about your risk tolerance, don’t forget to consider inflation risk (the risk that the return of your investments won’t keep up with increases in the prices of goods and services) and longevity risk (the risk of outliving your savings). Just like investment risk, market changes can affect these risks, too.
- Set a “check date” to stay on track. As the market changes over time, your investment mix may stray from your investment strategy. To keep it on track, pick a date that you’ll easily remember. Then, check your investment mix on that day each year. If your portfolio has drifted more than 5% from your targeted asset allocation, it’s time to rebalance.
It can be hard to make clear and careful decisions when you’re overwhelmed with emotion, and that goes for your saving and investing decisions, too. Taking time to prepare for market twists and turns can help you stay in control of your decisions—not your fear.
1Fidelity Investments | 6 Habits of Successful Investors | 2026
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