5 ways to manage market ups and downs

Markets are unpredictable. Sudden changes in value can be driven by countless variables - from economic shifts to unexpected policy changes, like the current uncertainty caused by wars overseas and tariffs here at home.

In such a volatile environment, staying prepared is key. Here are 5 tips to help you navigate market volatility.

1. Learn what you can control

While some market shifts stem from external forces - government regulations, geopolitical events, and trade disputes - there are aspects investors can manage.

Rather than reacting to every fluctuation, experienced portfolio managers focus on measured, strategic adjustments designed for long-term stability.

"Periods of market stress remind us of an important truth: investors can’t control headlines or short‑term market moves,” says Christine Tan, Assistant Vice-President, Portfolio Management, Sun Life Global Investments. “But they can control how portfolios are built and how decisions are made. Long‑term success is less about predicting the next move or timing the market, and more about maintaining discipline through uncertainty.”

When you break down the elements of trying to time market volatility, this measured approach makes sense. Consider the decision to “go all cash.”

You have:

• A 50% chance of being right on selling to cash, or
• a 50% chance of missing a big loss or missing a potential gain.

But you then have to get the timing right on re-entering the market. You have a 50% chance of being right here, avoiding even more loss and getting a big gain. And that’s another source of uncertainty.

Here are a few possible outcomes of timing your investments.

Perfect timing: Missing the loss, re-entering the market at the bottom, and participating fully in a subsequent recovery.

OK timing: Missing half of the loss, re-entering the market halfway through a subsequent short-term gain.

Trapped-in-regret timing: Capturing all of the loss (by selling at bottom); waiting for a sign of improvement; remaining indecisive; and missing most of a subsequent recovery.

Remember this simple advice: time in the market is more important than timing the market.

2. Embrace asset mix

Your mutual funds may hold equities or stocks. When equity markets become extremely volatile, global markets tend to become more correlated. That is, they move together more closely. This is temporary, but still unsettling. It creates a feeling of “nowhere to hide” within equities.

Asset class diversification – your mix of bonds and equities – can provide you with some protection. In general, most bond mutual funds are less volatile than equity funds.

When you set up your investment plan with an advisor, they can help you establish a mix or portfolio. It takes several things into account, including your:

• Age,
• goals,
• tolerance for risk, and
• timing – when you need the money.

“Diversification isn’t about avoiding volatility, but about building portfolio resilience,” says Tan. “A thoughtful mix of assets is designed so different parts of a portfolio can respond differently to shocks, helping investors stay invested even when markets feel unsettled.”

3. Learn about volatility – and how to manage it

There are additional ways to reduce volatility in your investments.

Mutual funds come in many varieties. Each fund has a risk rating you can find in its Fund Facts (available on fund company websites). This rating reflects how much the fund's returns have changed from year to year. It doesn't tell you how volatile the fund will be in the future, and it can change over time. Also, a fund with a low-risk rating can still lose money. But this is one of the benefits of reviewing Fund Facts as you consider investments.

A financial advisor can evaluate mutual funds and combine them. They may recommend funds designed with less volatility than the equity markets. These are called “low-volatility” equity funds.

Or an advisor may recommend funds with a track record of avoiding the full impact of previous market downturns. These are funds that have low “downside capture.” That means when markets decline, historically these funds have declined less. This isn’t an indicator of future performance. But it does show evidence that a manager has not been duplicating the market.

Lastly, there are mutual funds called “managed portfolios” or “managed solutions.” They not only spread your risk across many asset categories. They also may make small changes in the asset mix in the short term to reduce risk. This is called “tactical asset allocation.” Not all managed portfolios use tactical asset allocation, so it’s something to discuss with an advisor.

“The most effective investment decisions are rarely made in the heat of the moment,” says Tan. “A repeatable investment process, grounded in clear objectives and risk awareness, helps investors avoid reactive moves and stay aligned with their long‑term plans.”

4. Get to know guarantees

Many Canadian investors want to participate in the growth of the markets. But they’re willing to sacrifice some return, in exchange for slightly higher fees that pay for insurance guarantees. An advisor can help investors put all or just a portion of their portfolios in investments like segregated funds. These products can provide:

• Maturity and death benefit guarantees,
• estate planning benefits,
• potential creditor protection, and
• the potential to bypass probate.
  

Other investments such as annuities and guaranteed investment certificates (GICs) have no equity-market risk. Payout annuities, as opposed to accumulation annuities, provide guaranteed income for life or for a specified period. They have their own trade-offs, where investors give up the market’s potential upside in exchange for certainty.

Here again, an advisor can recommend a product mix. They’ll base their recommendations on both your needs and the investment environment.

5. Accept that loss aversion is real

Here’s one of the key lessons of behavioural economics. On average, people dislike losses twice as much as they enjoy gains. That’s called “loss aversion.”

Imagine if your portfolio value is significantly down from its high. In this case, you could experience some negative emotions: frustration, fear, anger and regret.

“Market declines test investor confidence as much as portfolios,” says Tan. “Recognizing the emotional side of investing and planning for it in advance can be just as important as asset allocation, when it comes to achieving long‑term financial goals.”

You can prepare for the times when market values decrease. An advisor is there for you in good times and bad. They can help you focus on your goals and timeline. And they’ll help you understand your options – including which investments to make part of your plan.

Speak to your advisor to learn more about investments and financial strategies. If you don’t have an advisor, you can connect with an advisor today.

It’s a good idea to learn about avoiding market timing, asset mixes, volatility, guarantees and accepting decreasing market values. You’ll be a more informed and better investor.