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Top 5 Mistakes Investors Make in a Volatile Market

admin • June 12, 2023

Personal finance is a unique blend of cold, hard data and mathematical equations, and deeply personal, emotional decisions. You can know all the right investment, retirement, and tax strategies, and still be subject to emotional decision-making. 

That’s why having a financial plan you can comfortably rely on through market twists and turns is so important. It won’t completely solve your desire to change course or take away all feelings of uncertainty, but it can be a guiding path. 

There are some parts of personal finance where emotions should be taken out of the equation as much as possible—investing is one of those areas. Investing is a long-term plan for growing and building your wealth, an area where strategy and math should rule. 

When considering your investments, it’s important to understand that the market has a history of volatility and subsequent effects on investors. There’s nothing new under the sun, and that includes common mistakes investors make in volatile markets. 

The U.S. Stock Market 

The stock market in the United States is a critical component of our free-market economy. It refers to buying and selling shares of publicly traded companies through two stock exchanges, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automatic Quotation System (NASDAQ) . 

The stock market is regulated by the Securities and Commissions (SEC) and can be an indicator of how well the overall economy is performing. Many investors have a portion of their portfolios invested in the markets. 

Investing in a Volatile Stock Market  

Volatility in a securities market refers to the stocks rising or falling more than one percent over a continuous period of time. This fluctuation is a measure of the magnitude of price changes in the stock market. 

A higher volatility means there are larger swings, indicating a higher level of uncertainty, risk, and a chance for significant losses or gains. While lower volatility indicates lower price swings, making the market more predictable and stable. 

Many factors contribute to market volatility, including politics, health crises, corporate earnings readouts, interest rates, current events (such as a presidential election), inflation, supply and demand, and other factors. 

Bull vs Bear

A bear market is characterized by increased volatility, stock price declines, slow economic growth, and an overall pessimistic sentiment among investors. While a bull market is characterized by decreased volatility, stock price inclines, economic growth, and investor optimism. 

Both markets can lead investors to drastically change their investment strategy in order to preserve their capital or capitalize on market trends. It’s important to note, however, that no one can accurately and consistently predict the stock market’s performance. 

Top 5 Mistakes Investors Make in a Volatile Market

Ideally, the best time to rebalance and make changes to your investment portfolio is before the market becomes volatile, which, unfortunately, is often impossible to predict. But when market volatility begins, it’s often best to avoid these mistakes and stay your course until things settle down. 

Get to know these five common mistakes investors make in a volatile market so you can learn to avoid them yourself: 

  1. Letting your emotions lead.
  2. Panic selling.
  3. Staying too liquid.
  4. Failing to diversify.
  5. Navigating uncertainty alone.

1. Letting your emotions lead

There are plenty of emotions that may lead us during times of market volatility including impatience, fear, greed, and social comparison. 

As we mentioned, market volatility is marked by drastic price swings—making it tempting for investors to become impatient and chase immediate gains to counteract recent losses. These short-term strategies, however, often fail because they are rooted in emotions (greed being one of them), rather than long-term investing perspectives. 

Market volatility also brings fear and panic to the hearts of investors—especially since market volatility is often associated with stressful and uncertain times (such as the COVID-19 pandemic). Fear can help save us from life-threatening situations as a basic survival method, but when it comes to leading us in our investment choices, it’s a very poor guide. 

Social comparison can also lead us to deviate from our long-term investing plans. When you hear about a hot investment tip or trick that worked for your cousin’s neighbor’s best friend, it can be tempting to want to try it out—especially when your portfolio isn’t looking too good. But chasing a “new” investment or strategy has the potential to lead you astray. Consistent, careful investing might sound boring, but it’s often your best bet for building long-term wealth. 

Allowing emotions to lead your decisions can derail the discipline and patience required to make smart investment decisions. Setting realistic expectations and thoroughly researching your investment choices can help mitigate the strong emotions associated with investing. 

2. Panic selling 

When your portfolio is steadily decreasing day after day, it can be tempting to want to “stop the bleeding” and sell. But if you do this, you guarantee your losses because you’re not giving your stocks a chance to rebuild and recover. 

These impulsive decisions are very common and understandable—it feels more productive to do something than just sit back and wait. However, it’s important to stick to your financial plan and have a long-term perspective . You can even look back at the market’s history to reassure yourself that market volatility is normal. 

Selling your shares prematurely in a panic can lead you to miss out on some of the best days in the market ( which are often close to the worst days in the market —again, something no one can accurately predict). 

When you remember that investing is a long game, it will be easier to suppress your short-term concerns and panic. In the future, you’ll look back and see that the temporary dip was trivial in your overall portfolio performance. 

3. Staying too liquid 

Witnessing market volatility can lead investors to want to stay out of the game completely—which psychologically, makes perfect sense! If we see our portfolio (and those of our friends and family) nose-dive, it can make us want to cash out and sit on the sidelines. 

But as we mentioned above, some of the market’s best days happen during market volatility, and missing out on the best days can be detrimental to your portfolio. There’s a reason “ time in the market, not timing the market ” is a common phrase. 

When stock prices decrease, they are what we like to call “on-sale”. Sales can be easily recognized outside of the market, but inside the market, it can be harder to conceptualize. Consistently investing, regardless of market volatility, can allow your money to continually buy shares—and during market downswings, you’re getting a great price! 

We want to note that we’re referring to money you’ve set aside for investing purposes, not a liquid emergency fund. Having a liquid emergency fund can help alleviate fears during market volatility because it can provide you with a safety net for immediate cash needs. 

4. Failing to diversify 

Market volatility can feel particularly painful when your portfolio is primarily wrapped up in the market. A properly diversified portfolio can have assets tied to the market, but it won’t be in it 100%. 

Often during turbulent times, different asset classes, industries, and even parts of the world perform differently. Diversification helps mitigate risk and allows your portfolio to be exposed to different types of investments, which will all perform differently throughout your investing journey. 

5. Navigating uncertainty alone 

Maneuvering market volatility can be scary when you’re trying to go about it alone. Navigating uncertainty without a guide can make it tempting to chase hot tips or make irrational, emotional decisions. 

But when you have someone in your corner, encouraging and reassuring you, it makes market swings more bearable. The financial planners and advisors at Five Pine Wealth Management are the encouragement and support your financial portfolio needs. 

We understand investing emotions, temptations to panic sell and stay liquid, the detriments of not diversifying, and the loneliness of navigating uncertainty alone. 

That’s why we offer our services to the everyday investor. The investors looking to build sustainable wealth. The investors working hard to care for their families and communities. Investors like you. 

To see how we can help you navigate market volatility and avoid common investing pitfalls, check out our website or shoot us an email at info@fivepinewealth.com . 

The Millennial Advantage: How to Use Your Generation’s Strengths to Build Wealth

March 28, 2025
Despite always hearing about the aging of America and the baby boomer generation, did you know the millennial generation is actually the largest age group in the country? Born between 1981 and 1996, millennials outnumber baby boomers post-WW2, with about 72.2 million millennials in the United States, as of 2023. The media often highlights millennials' financial challenges: mountainous student loan debt, a competitive job market, unaffordable housing, and credit card debt. There’s no doubt it’s been more challenging for millennials to save and gain a stable financial foothold compared to previous generations. Yet despite these hurdles, millennials have financial opportunities available to them that previous generations did not. Millennials came of age with the rise of the internet and advances in technology; they’re digital natives, incredibly tech-savvy, and well-positioned to master the digital era they live in. Millennials’ unique position in history gives them advantages when it comes to investing, starting a business, and increasing their financial literacy. Millennials and Investing Millennials are changing the game when it comes to investing—innovative financial platforms and investment products have helped to evolve the investment landscape, and have made investing more accessible than ever before. As a millennial, embracing this innovation can help move you closer to achieving your goals and building a financially secure future. Impact Investing Millennials are known for being socially conscious with their spending and supporting brands and companies that align with their values. This desire to make a difference often extends into their investments—intentionally choosing to invest in companies that reflect their values and promote the causes they support. Through impact investing, you can support positive global change while also working toward your financial goals. Impact investing can be done through investing in Environmental, Social, and Governance (ESG) investment funds, or through pursuing a strategy of Socially Responsible Investing (SRI). ESG funds focus on businesses that have strong environmental policies, social impact initiatives, and good governance. These funds have become increasingly popular with investors, like millennials, who want to support companies that prioritize sustainability and ethical practices. SRI focuses on investing in companies that promote environmental sustainability, social justice, and corporate ethics. SRI can also exclude investing in companies that engage in activities that are considered negative or harmful—tobacco, alcohol, fossil fuels, firearms, or the defense industry. Cryptocurrencies and Decentralized Finance Cryptocurrencies are newer investment frontiers that techie millennials can be more comfortable exploring than older generations. Crypto such as Bitcoin and Ethereum are digital currencies that operate on blockchain technology , which provides increased transparency and security. Crypto investments can be risky, but can also offer high rewards. Decentralized Finance (DeFi) platforms also leverage the security and transparency of blockchain technology to offer decentralized financial services and transactions. DeFi platforms provide opportunities for lending and investing without traditional intermediaries like banks and other centralized institutions. For millennials, DeFi represents a cutting-edge way to engage with financial services and they can offer more control and potentially higher returns than traditional methods. The Power of Time One of the biggest advantages millennials have when it comes to investing is time. If you start investing early, you can benefit from compound interest and long-term investments, which can significantly boost your returns and help increase your wealth. Compound interest is the process where the interest you earn on an investment is reinvested, which generates more interest. The longer your money is invested, the more it can grow. Even small, consistent contributions to your investment portfolio can accumulate substantial wealth over time. Having a long-term investment horizon allows you to ride out market volatility, and capitalize on growth over time. By not reacting to short-term market fluctuations, you can achieve more stable returns. Long-term investing is a powerful tool that can help you build a secure financial future. Millennial Entrepreneurship This generation’s core characteristics set them apart as innovators and business creators. As digital natives, millennials have a strong grasp of technology which allows them to leverage digital tools such as social media marketing, e-commerce tools, and data analytic platforms to grow their businesses exponentially. You’ve likely seen peers thrive in their ventures through their use of social media, which has become a critical tool for marketing, brand building, and customer engagement. Community-building is also highly valued among this generation—the use of LinkedIn alone helps entrepreneurs connect with fellow collaborators, business owners, and mentors. Similar to aligning your investments with your values, you can easily integrate your ethical beliefs into your business ventures. Ethical business practices such as developing eco-friendly products, creating an inclusive workplace culture, and advocating for fair trade processes can make a positive impact and build loyal customer bases. Millennials and Financial Literacy The millennial generation has more resources than ever to increase their financial literacy. Free online finance courses are easy to access, readily available, and enable you to educate yourself so that you can make smart financial decisions to help you achieve your goals. Personal finance apps like Mint and YNAB (You Need a Budget) can also increase your financial literacy by helping you understand and manage your finances more effectively. They offer features like budget tracking, expense management, and financial goal setting to help you be in full control of your finances. Finance apps make it easier for you to stay on top of your financial health and make informed decisions in managing your money. Work with Us to Reach Your Goals  Ever-evolving technology has transformed the financial landscape significantly over the last few decades and millennials are more prepared to take advantage of that transformation than any generation before them. While you can take charge of your finances on your own, working with a financial advisor can help you find your path and stay the course of your journey toward financial security. Financial advisors can provide advice that is tailored to your individual circumstances, to better meet your unique needs and objectives. At Five Pine Wealth Management , we’re committed to helping you create a customized financial plan and investment strategy to help you reach your current and future goals. As fiduciary financial advisors, we always act in your best interest in every step we take with you on your financial journey. We also offer virtual financial planning for millennials looking to fit financial planning into their own schedules. To see if we can help you, email us or give us a call at 877.333.1015 today to schedule a meeting.

Just Got a Raise? Implement These 5 New Strategic Wealth Opportunities

March 21, 2025
Getting a raise is an exciting moment in your career and financial journey. Maybe you’ve gone through an executive-level position change and received a 10% pay bump or an internal promotion yielded you an additional 15%. Regardless of how you got your raise, you’re now in a unique position to move the needle on your long-term financial goals (and maybe splurge a little, too). But before you pull the trigger on that major purchase you’ve been eyeing, it’s important to have a long-term plan for the extra money in your paychecks. Even a significant raise can erode quickly if you suddenly upgrade your home, start vacationing like a celebrity, or snap up that Mercedes you’ve been eyeing. Below are our top five strategic wealth opportunities for you to consider the next time you receive a raise. First Things First: Understand Your New Numbers A 10% or 20% raise may sound like a huge boost, but not all that money will land in your bank account. Before making any financial moves, it’s important to calculate your new take-home increase after taxes and contributions. For example, if you receive a $25,000 raise on a $175,000 salary, you might expect $2,083 more per month. However, after accounting for federal taxes, state taxes, and other deductions, your actual monthly increase might be closer to $1,500. Knowing your actual take-home pay helps you set realistic expectations and make informed financial decisions. Getting a Raise: 5 New Strategic Wealth Opportunities For high-income earners, getting a raise isn’t just more spending power—it’s an opportunity to build lasting wealth while minimizing taxes. Instead of falling into lifestyle creep, consider these five wealth-building strategies to maximize your higher income. 1. Grow: Maximize Tax-Efficient Investment Opportunities With your increased income, you now have more opportunities to maximize tax-advantaged accounts and investment vehicles. For 2025, you can contribute up to $23,500 to your 401(k), plus an additional $7,500 if you're 50 or older. If you weren't maxing out your contributions before, your raise provides an excellent opportunity to reach these limits. Let's say you direct $750 of your new monthly take-home pay to your 401(k). You not only build retirement savings but could save approximately $2,160 in federal taxes annually if you're in the 24% tax bracket. Consider increasing your retirement and investment contributions by the same percentage as your raise. For example, if you receive a 10% raise, aim to increase your contributions by 10% of that raise. This incremental adjustment will help ensure you can maintain the lifestyle you're accustomed to when you retire. 2. Save: Optimize Tax Strategies to Reduce Liabilities A higher income often means entering new tax brackets, making tax efficiency more crucial than ever. Without proper planning, you might find a significant portion of your raise going to Uncle Sam instead of building wealth. Consider switching to a high-deductible health plan (HDHP) for your family, which can lower your premiums while giving you access to a Health Savings Account (HSA). In 2025, you can contribute up to $8,550 for family coverage , potentially saving around $2,000 annually in taxes. Additionally, the money in your HSA grows tax-free and can be withdrawn for qualified medical expenses without tax liability. 3. Diversify: Explore Alternative Investments A higher income can open the door to new investment opportunities, allowing you to diversify beyond traditional stocks and bonds. Alternative investments like real estate investment trusts (REITs) can provide exposure to different asset classes, potentially offering both passive income and long-term appreciation. These types of investments often move independently of the stock market, helping to balance overall portfolio risk. They can also offer lower barriers to entry compared to direct property ownership or other traditional alternatives. The key is to align your investments with your risk tolerance and liquidity needs while taking advantage of opportunities that complement your existing strategy. 4. Strengthen: Build Your Estate With more income comes greater potential for building generational wealth. Investing half of your $25,000 raise annually for 20 years with a 7% return could add over $500,000 to your estate. This makes it essential to have proper structures in place for efficient wealth transfer. To ensure your wealth transfers efficiently, consider: Trusts to protect assets and minimize estate taxes Life insurance strategies for wealth preservation Family-limited partnerships for multi-generational wealth planning These structures become increasingly valuable as your wealth grows. 5. Impact: Upgrade Your Philanthropy & Social Impact There's something powerful about reaching a place in life where you can give back meaningfully. Beyond the personal satisfaction of a higher income, this new chapter brings an opportunity to create lasting positive change in your community and the causes closest to your heart. Maybe you still remember the community college professor who believed in you when you weren't sure about your path. Now, twenty years later, by creating a donor-advised fund (DAF) to support student scholarships, you're not just making education more accessible—you're giving another student their own life-changing mentor. By thoughtfully structuring your charitable giving through vehicles like DAFs or qualified charitable distributions from retirement accounts, you can maximize both the impact of your generosity and the tax benefits that come with it. After all, effective philanthropy isn't just about giving money away—it's about creating meaningful change in the ways that matter most to you. Red Flags: Top Signs of Lifestyle Creep While getting a $25,000 raise provides excellent opportunities for wealth building, it's important to avoid (too much) lifestyle creep. That upgraded car lease might cost an extra $200 monthly, the bigger house another $800 in mortgage payments, and the premium credit card's annual vacation package another $400 monthly in travel costs. Before you know it, your entire raise can get absorbed by new expenses. While there's nothing wrong with enjoying the fruits of your hard work, the key is being intentional about which lifestyle upgrades truly matter to you. Here are some common warning signs that lifestyle creep might be eroding your raise: Your monthly expenses rise automatically with your income You upgrade multiple lifestyle aspects at once (housing, car, travel, dining) Your savings rate remains unchanged despite higher earnings Luxury spending becomes your new normal Your cash reserves aren’t growing despite a higher paycheck Instead of automatically increasing spending across the board, take time to identify the one or two changes that would bring the most joy and fulfillment to your life. Then, invest the rest. Put Your New Money to Work with Five Pine Wealth While these strategies focus on wealth building, don't forget to invest in yourself through continued education, health, and meaningful experiences. The key is finding the right balance between growing your wealth and enjoying the fruits of your success. Whether you've recently received a raise or are anticipating one soon, having a plan in place can help you maximize this opportunity. Our team can help you evaluate which of these strategies would work best for your unique situation and create a customized plan to help you reach your financial goals. At Five Pine Wealth Management , we can help you implement these strategies in a way that aligns with your personal goals and values. To learn more about making the most of your increased income, schedule a meeting with us. Email us at info@fivepinewealth.com or call us at 877.333.1015.  Let's work together to transform your raise into lasting wealth.
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