Strategies to Protect Your Investments During Market Volatility

One thing in life is certain…uncertainty! As an investor in the stock and bond markets, constant change can be your greatest challenge or, viewed differently, as a strategic opportunity if you make informed, objective decisions. Market volatility can also feel like a rollercoaster you didn’t sign up for. One day, your portfolio is soaring; the next, it’s plummeting, leaving you wondering how to safeguard your hard-earned wealth over longer periods.

Our Buffalo Grove CFP® professionals understand the intricacies of market dynamics, and our goal is to help you navigate market ups and downs more confidently. 

Drawing from insights from our YouTube videos and “Our 2 Cents” podcast, here are some time-tested strategies for safeguarding your investments when the markets turn volatile.

Read Our Latest Guide:Using Technology to Be More Financially Prepared in 2025

What Causes Market Volatility?

First, let’s get real about what volatility means for you. 

It’s not just numbers on a screen—it’s the market’s way of testing your resolve. As Steve Lewit, co-founder of SGL Financial, often says on our podcast, “Volatility isn’t the enemy; it’s how you react to it that matters.” 

Certain events can shake things up in the market, whether it’s a trade war, inflation spikes, recessions, or unexpected economic data—like the inflation updates we dissected in our February 2024 episode, “Harnessing Fear to Build Wealth.” 

Your job? Stay calm and disciplined. Consider partnering with a Buffalo Grove CFP® or financial professional who can help you see the bigger picture and ensure your decisions aren’t driven by emotion but rather by long-term goals.

The winners are investors who pursue long-term goals – such as retiring at 65 and living another 30 years in a comfortable, secure lifestyle.

Diversify Like Your Future Depends on It

You’ve probably heard this before, but diversification is your first line of defense. At SGL Financial, we don’t just toss this term around lightly—it’s a cornerstone of our approach to client assets. Imagine your portfolio is a buffet: if you load up on one dish and it goes bad, you’re in trouble. Select several dishes and your odds of having a positive experience increase dramatically. 

In this case, spread your investments across stocks, bonds, cash, and alternative assets like income-producing real estate and annuities. 

In one of my YouTube videos, “Protecting Your Retirement Savings,” I explain, “Diversification reduces risk without sacrificing opportunity.” 

It’s not about avoiding losses entirely—that’s impossible—it’s about making sure one bad apple doesn’t spoil your whole basket.

Lean Into Safe Havens

When the markets are volatile, consider investing in Treasury bonds, high-yield money markets, TIPS, or even a Multi-Year Guaranteed Annuity (MYGA) that can offer stability. 

MYGAs, with a guaranteed 4% return over five years at the time of this writing, can lock in gains while keeping your money liquid when needed. 

As financial advisors in Buffalo Grove, we often recommend pairing these with your riskier assets. This gives you more diversification, knowing that part of your portfolio isn’t at the mercy of Wall Street’s mood swings.

Master the Art of Rebalancing

Rebalancing isn’t just another investment strategy for realigning your assets. When used properly, it can also act as a shield. For example, if the markets shift, your carefully planned 60/40 stock-to-bond split can morph into 70/30, exposing you to more risk than you signed up for. 

Regularly tweaking your portfolio keeps it aligned with your goals and risk tolerance. 

Our video “How to Avoid Common Investment Mistakes” stresses checking your investments quarterly or after major market moves. A Buffalo Grove CFP® professional can crunch your numbers, ensuring you’re not overexposed when volatility hits.

Embrace the Bucket Strategy

Another way to manage volatility is to use the Dynamic Income Bucket Strategy. In this strategy, you divide your money into “buckets” based on time horizons in five- or ten-year chunks. 

The first bucket holds liquid cash or low-risk assets to cover immediate needs, while later buckets grow into slightly riskier investments. 

If the market drops substantially early in retirement, your short-term bucket keeps you comfortable without forcing you to sell assets at a loss. 

Steve Levit often notes, “It’s about creating guardrails so a bad sequence of returns does not derail you.” Think of this strategy as a way to be more proactive about protecting your nest egg.

Don’t Sleep on Tax Efficiency

Volatility isn’t just about market dips—it’s also about keeping more of what you’ve accumulated over the years. No one wants to pay more in taxes than is legally required. 

Tax-loss harvesting is one method to assist in limiting your tax exposure related to your investments. If you have a situation where one of your investments drops in value, you can use tax-loss harvesting by selling the stock to lock in the loss and then use it to offset gains elsewhere in your portfolio. You can even deduct up to $3,000 against ordinary income annually. Even under-performing assets can have some economic value.

Our financial advisors in Buffalo Grove can develop a tax plan for your unique situation, ensuring volatility doesn’t double-dip into your profits.

Stress-Test Your Plan

You wouldn’t drive a car without checking the brakes, right? 

The same goes for your investments. Stress-testing your portfolio—modeling how it’d handle a 20% market drop—reveals weak spots before they become craters, giving you a proactive edge in uncertain times. 

By simulating a significant downturn, you can see which assets might drag you down and which hold steady, thereby exposing any over-reliance on volatile stocks or the reality of insufficient buffers like cash or bonds. 

At SGL Financial in Buffalo Grove, IL, our financial advisors use this approach to pinpoint vulnerabilities, adjusting your strategy to absorb shocks without undermining your pursuit of goals. It’s not about predicting the next crash—it’s about ensuring you’re still comfortable when it’s over. 

Avoid Emotional Traps

Let’s be honest: emotions can sabotage even the best-laid financial plans. When stocks plummet, fear screams, “Sell!” When they soar, greed whispers, “Buy more!” 

As I like to say, “Using logic over emotion can be your investment superpower.” 

Stick to your plan, and pay less attention to noisy headlines designed to increase a publication’s subscribers and revenue. You have heard the old media saying: “If it bleeds, it leads.” Tune out the noise, trust the process, and remain diligent about having a long-term view of your investment strategy.

Regular check-ins with your financial advisors in Buffalo Grove can also help you stay grounded, especially when the market is throwing tantrums.

Build a Cash Cushion

Cash isn’t sexy, but it can be a lifesaver during times of volatility. 

Having six months to a year of expenses in a high-yield money market or savings account means you won’t have to liquidate investments at a loss to cover bills during turbulent times. 

One of the messages we convey to our clients regularly is that liquidity without penalty is key. 

If the market’s down 20%, you don’t want to sell stocks to pay the mortgage. A cash cushion buys you time to ride out the storm.

Experience Matters

Finally, don’t go it alone. Navigating volatility is tough, but it doesn’t have to be that way. With over 30 years of experience, our fiduciary team—led by Steve Lewit and myself—puts your interests first. 

We’re not here to sell you products and other services. Whether it’s a free portfolio analysis (a $500 value, no strings attached) or a deep dive into your retirement goals, our financial advisors in Buffalo Grove are your partners in this journey. As Steve says, “Money’s important, but it’s the life it enables that really matters.”

Ready to take the next step? Call us at 847-499-3330 or click here to schedule a chat. Let’s turn uncertainty into opportunity—together.