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 . 

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What's Inside Your 457? (And Why It Matters More Than You Think)

April 30, 2026
Key Takeaways Your 457 should work alongside your pension to support your overall retirement income plan. Many 457 plans are set on autopilot, but your investments shouldn’t stay that way as you near retirement. Understanding what you're invested in helps you make better decisions when markets move. Turning 50 is your signal to review your 457 more closely so you can check your contributions, risk level, and how it fits with your pension before retirement gets too close. Like many first responders in Washington and Idaho, you probably have a pretty solid grasp of your "Plan A." Between the WA LEOFF Plan 2 or ID PERSI, you’ve spent your career earning a guaranteed monthly pension. It’s the foundation of your retirement — the steady paycheck that arrives regardless of what the stock market does. But then there’s that "other" account. The one you’ve been tucking money into every pay period through deferred compensation. In Washington, it’s usually the Washington State Deferred Compensation Program (WSDCP); in Idaho, it’s often the State of Idaho 457(b) Plan. When we sit down with firefighters and police officers who are within 10 years of their "end of watch" date, they usually know two things about this account: how much is in it and that they’re glad they started it. But when we ask, 'What is that money actually doing?' — that question usually gets a pause. If you’re 50 or older, it’s time to move past the "set it and forget it" mentality. Let’s take a look at how your 457 works and how to make sure it’s working for you. 457 Plan Investment Options  Unlike your pension, which is managed by the state, your 457 is a “defined contribution” plan. That means the outcome depends entirely on how much you put in and how those funds are invested. A 457 plan is just a container. Think of it like a toolbox. What matters is what’s inside the box. Your account isn’t sitting in cash (at least it shouldn’t be). It’s invested in a mix of underlying funds, usually including: Stock funds (equities): These are your growth engines. They tend to go up over time, but they can be volatile. These could be U.S. stock funds or international funds. Bond funds (fixed income): These provide stability and income, but with historically reduced long-term returns. Stable value or cash equivalents: Lower risk, but also lower growth. Most public service 457 plans in the Northwest offer a menu of these options. Some people choose to build their own mix, while others choose a single “all-in-one” fund and let it do the work. This brings us to the most common choice we see… What is a Target-Date Fund? A Target-Date Fund (TDF) is designed to be a one-stop shop. The “date” in the name is the year the fund assumes you will retire. If you plan to hang up the uniform in 2030, you’d likely be in a 2030 fund. A TDF automatically shifts its risk level as you get closer to that date. This is called the glide path . When you are 20 years away from retirement, the fund is aggressive. It buys mostly stocks because you have time to recover from market crashes. As you get closer to the target year, the fund manager automatically “glides” the investments away from risky stocks and into “safer” bonds and cash. TDFs are built for the “average” American worker who relies solely on Social Security and a 401(k), but you aren’t the average worker. You have a LEOFF or PERSI pension. Because your pension acts like a “super bond” (stable, guaranteed income), being too conservative in your 457 might hinder your growth. Conversely, if you’re planning to retire at 53 (common for LEOFF 2) but your fund is target age 65, you might be taking way more risk than you realize. It’s also important to note that two funds with the same year, for example, 2035, can have very different levels of risk depending on the provider. One may still hold 60% in stocks near retirement, while another might be closer to 40%. How Risk Changes as Retirement Approaches In your 20s, 30s, and even early 40s, “risk” is your friend. Risk is what grows a $50,000 account into a $500,000 account. However, as you approach the age of 50, the definition of risk changes. That’s because you’re entering what we call the “retirement red zone,” roughly five years before and five years after your retirement date. This is when: Your portfolio is at its largest You have less time to recover from downturns You may soon rely on the money for income We look at two specific types of risk for our clients: Sequence of Returns Risk: The risk that a market crash occurs just as you start taking withdrawals. If the market drops 20% the year you retire, and you start pulling money out to travel or pay off the mortgage, your account may never recover. Inflation Risk: If you get scared and move everything into the “Fixed Account” or “Stable Value Fund,” you might not lose money, but you’ll lose purchasing power. If your account earns 2% but the cost of living goes up by 4%, you’re technically getting poorer every year. Finding the “Goldilocks” zone — not too hot, not too cold — is the primary job of a pre-retiree. The Age 50 Checklist Once you’re in your 50s, it’s time to stop running on autopilot and take a closer look at your 457. Check Your “Catch-Up” Options In 2026, the standard 457 contribution limit is $24,500; however, once you’re 50, you can add an extra $8,000 in “Age 50 Catch Up” contributions. Even better, if you're within three years of your normal retirement age and haven’t maxed out your contributions in previous years, you may be able to contribute up to double the normal limit ($49,000). This is a massive boost for your savings. Diversify Your Tax Buckets Most first responders have their money in a Traditional 457, meaning you get a tax break now but pay taxes when you take the money out. Both Washington and Idaho offer Roth 457 options. With a Roth, you pay the tax today, but the money grows and comes out tax-free. For high-earners who expect their pension to keep them in a higher tax bracket during retirement, having a “tax-free” bucket of money can be helpful. Coordinate With Your Pension If your LEOFF or PERSI pension covers 70% of your needed income, your 457 can afford to be a bit more aggressive in fighting inflation. If you plan to use your 457 to bridge the gap until you collect Social Security, that money needs to be protected differently. Let’s Take a Look Together At Five Pine Wealth Management, we work with first responders in Washington and Idaho who are approaching retirement and want clarity around their financial picture. We understand how LEOFF Plan 2 and PERSI fit into the bigger picture, and how your 457 can support the retirement you’ve worked hard to build. If you’d like help understanding what you’re invested in, we’d be happy to take a look with you. You can email or call us at 877.333.1015 to schedule. We’d welcome the conversation. You’ve spent your career looking out for the community; let us help you look out for your future. Frequently Asked Questions (FAQs) Q: Is a Target-Date Fund enough for my 457 plan? A: For many people, it is, but as you get closer to retirement, it’s important to review whether the fund’s risk level matches your timeline and overall financial picture. Q: Is there a penalty for taking money out before age 59½? A: No. Unlike a 401(k), the 457 plan has no 10% early withdrawal penalty if you leave your employer, making it an ideal tool for first responders retiring in their early 50s. Q: Should I choose a Target-Date Fund or build my own portfolio in a 457? A: Target-date funds offer simplicity, but building your own portfolio allows for more customization. If you have a pension that already provides a stable income, building your own could be a good option.

He Had $1.1 Million and Almost Went Back to Work. Here's What Changed

April 22, 2026
Key Takeaways A portfolio designed for accumulation may carry too much risk, or the wrong kind of risk, once you stop contributing. When two spouses are at different financial life stages, their investment strategies should reflect that difference. A Roth conversion strategy during the years before required minimum distributions begin can meaningfully reduce your long-term tax burden. Rob spent 30 years building a picture-perfect financial foundation for his retirement. He maxed out his 401(k) and stayed disciplined through market downturns. By the time he retired from a long career in plant management and HR, he had a nest egg most people only dream about. But then retirement arrived, and with it came a new kind of anxiety. Rob spent all those years learning how to build wealth, but never how to draw it down. The accumulation phase was clear, but the decumulation phase is far more complex and far more personal. Rob had hired a financial advisor when he retired, hoping for guidance through that transition. Instead, he got portfolio management and investment decisions without the broader planning context he needed. That relationship didn’t last a year. And that’s when he and his wife Christie, came to Five Pine. The Numbers Behind the Plan: When They Started Today Rob’s age 57 63 Investable assets $1.1 million $2.5 million Net worth — $3.5 million Primary challenge No decumulation plan, Comprehensive plan in place heavy pre-tax exposure Key strategies Portfolio redesign, Ongoing tax planning, Roth conversion planning rebalancing When Saving Well Isn't Enough When we first met Rob and Christie, a few things stood out right away. Rob was recently retired with $1.1 million in investable assets (the vast majority of it in pre-tax retirement accounts). Christie, about ten years younger than Rob, was still working and earning a high income as a part-owner of a small business. They were a dual-financial-life household: one person winding down, one still in full accumulation mode. Rob’s most pressing concern was straightforward to state but harder to solve: how much could he spend without putting their retirement at risk? He wanted to travel, renovate the house, and buy a new vehicle without second-guessing himself. But after those decades of saving, spending felt foreign, even a little reckless. He had seriously considered going back to work, not because he needed to, but because he felt he couldn’t trust the numbers. Underneath that, a long-term tax problem was simmering. With most of their savings in pre-tax accounts, Rob and Christie were looking at significant required minimum distributions (RMDs) starting at age 73. And Christie, likely to outlive Rob by a meaningful margin, would eventually face those distributions as a single filer at higher tax rates. They weren’t in trouble, but without a plan, they were heading toward unnecessary complexity and tax liability. A Plan Built for Retirement, Not for Accumulation We started with the full financial picture. Before we touched the portfolio, we built a comprehensive financial plan and stress-tested it against different market scenarios, spending levels, and timelines. Once Rob saw the projections running out over a 30-year horizon, his hesitation about retirement began to lift. The plan gave him the number he needed and, more importantly, the confidence to trust it. From there, we redesigned the portfolio to match Rob’s phase of life. He had come from a Dave Ramsey background and had always preferred an all-equity approach: aggressive, growth-focused, and straightforward. That served him well during the accumulation years, when he contributed every month and had decades to recover from downturns. But in retirement and drawing from the portfolio regularly, it introduced more risk than his situation warranted. We restructured his holdings to roughly 60% equities, 25% fixed income, and 15% in alternative investments, specifically private credit funds and private real estate. The alternatives were a meaningful addition. They could potentially carry lower price fluctuation than publicly-traded assets and have the ability to generate distributions, which may potentially help support spending needs without forcing untimely equity sales. Christie's accounts, meanwhile, stayed aggressive. She's still contributing through her employer plan, still has years of earning ahead of her, and has time to weather market swings. Finally, we put a Roth conversion strategy in place for the years ahead. Timed to begin when Christie retires, the strategy takes advantage of a window when their income will likely be lower, but before RMDs kick in and before Christie potentially files as a single filer at higher tax rates. Converting pre-tax dollars gradually reduces the accounts that will eventually be subject to mandatory distributions, potentially saving hundreds of thousands of dollars in taxes over time. From Hesitation to Confidence Rob came to us considering whether he needed to keep working. He left with a plan that showed him that he didn't. Once the plan was in place, Rob and Christie started making the most of their years together, international sailing trips, travel they had put off, and experiences they had earned. A health scare along the way reinforced what the plan had already made clear: the goal is to fund a life worth living while you're healthy enough to live it. On the investment side, market volatility became an opportunity rather than a threat. When markets dropped sharply during a period of economic uncertainty, we rebalanced, selling fixed income to buy equities at a discount. As markets recovered, those moves contributed meaningfully to their overall growth. Five years in, their investable assets have grown from $1.1 million to $2.5 million. Beyond that, Rob and Christie have referred five family members to Five Pine, a reflection of the trust that developed alongside their plan. In Christie's own words: "Ben and Jeremy are honest, approachable, and very professional. They take great pride in getting to know clients and listening to each individual's goals. Honestly, they are the best fiduciaries I have ever worked with, by far." Your Decumulation Strategy Starts Before You Retire Rob's story is more common than most people realize. Disciplined savers often arrive at retirement without a spending plan, a tax strategy, or a portfolio suited to this new phase of life. If you're within five to ten years of retirement (or already there), it's worth asking whether your current advisor is doing comprehensive planning, including tax planning for retirement, or simply managing your investments. Over the course of a long retirement, that distinction can determine whether or not you’re equipped to tackle retirement with confidence. We'd love to help you find your number. Email us at info@fivepinewealth.com or call 877.333.1015. Let's talk.* Frequently Asked Questions (FAQs) Q: When should I start building a decumulation strategy? A: Ideally, five to ten years before you plan to retire. That window gives you time to gradually reposition your portfolio, identify potential tax issues before they become expensive, and stress-test your spending assumptions while you still have income coming in. Q: What role does Social Security timing play in a decumulation plan? A: Claiming Social Security early locks in a permanently reduced benefit, while waiting until 70 can increase your monthly payout substantially. The right timing depends on your health, other income sources, and whether a spouse will eventually depend on your benefit as a survivor. Coordinating with your Roth conversion strategy is also worthwhile, since both affect your taxable income. Q: What happens to my decumulation plan if the market drops early in retirement? A: This is often called the sequence of returns risk. A significant market decline in the first few years of retirement can have a lasting impact on a portfolio, because you're withdrawing funds at lower values. A well-designed decumulation strategy accounts for this by maintaining a portion of the portfolio in less volatile assets, so you're not forced to sell equities at a discount to cover living expenses during a downturn. *Names have been changed to protect client privacy*