Wild swings in the stock market can be unsettling for many investors, and they can feel especially daunting for young Canadians who are just beginning their investing journey.
Even with additional volatility from issues such as the trade tensions between Canada and the U.S., advisors say that, in the long run, these ups and downs may be only a short-lived disturbance for young investors—provided they stay focused on their goals.
“The first step is to do nothing dramatic,” says Sara McCullough, a Certified Financial Planner and owner of WD Development. “Don’t panic. Avoid rash selling, and don’t chase the market with impulsive buys.”
If volatility is causing concern, McCullough recommends taking a calm, practical approach: review your portfolio, confirm your risk tolerance, and remind yourself of the reason the money is invested.
For example, if a portion of your portfolio is earmarked for a down payment on a home purchase within the next three years, it likely shouldn’t be exposed to equity market risk. That money belongs in safer, short-term instruments.
Rankings
Compare the best FHSA rates in Canada
Invest with your risk tolerance in mind
Long-term investing is particularly advantageous for younger investors, who have time to ride out market cycles. Still, if you find that market swings cause real distress, it may be wise to adjust the portfolio so it better matches your emotional comfort with risk.
That typically means lowering equity exposure and increasing diversification. Paul Shelestowsky, senior investment adviser at Meridian Credit Union and Aviso Wealth, suggests adding fixed-income assets to bring more stability. “Consider increasing bond allocations and reducing stock weightings to restore peace of mind,” he says.
Bonds generally experience smaller daily swings than stocks and can help smooth portfolio returns over time. Another option is to shift some funds into guaranteed investment certificates (GICs), which provide a fixed return and protect your principal. Keep in mind, though, that GIC returns are often lower—especially after inflation—and funds are usually locked in for a set term.
Shelestowsky frames decisions in volatile markets as a spectrum. The least advisable response is moving investments into cash and waiting on the sidelines, because that often locks in losses and misses potential recoveries. “The middle option is to simply remain invested,” he notes.
From a financial perspective, the most effective move during market downturns can be to increase your holdings. “Volatility tempts people to flee to safety for psychological relief, but over time that tends to harm financial outcomes,” Shelestowsky says.
When prices fall broadly, it creates opportunities to buy quality companies at discounted levels. For younger investors with a long horizon, this volatility can actually work to their benefit by lowering the average cost of purchases over time.
Market volatility is a normal part of investing
McCullough emphasizes the importance of recognizing market behavior as cyclical. “We enjoyed extended positive markets for many years, and that has made volatility feel unusual,” she explains. “Young investors who didn’t experience the 2008 downturn may not be used to these normal market corrections.”
Markets decline from time to time—that’s part of how they function. Accepting that reality reduces emotional reactions and encourages disciplined decision-making.
Even with a well-constructed, diversified portfolio, watching sharp daily swings can take a mental toll. McCullough recommends limiting how often you check portfolio values—daily monitoring tends to amplify anxiety. Instead, review performance on a regular schedule, such as quarterly, and avoid making impulsive moves based on short-term headlines.
“You need to manage the human side of investing,” she says. “Talk it over with friends, go for a run, or do something that helps you decompress—but don’t let short-term emotions drive investment choices.”
Tools
Find a qualified financial advisor near you
Search our directory of credentialed advisors providing financial and investing services across Canada.
Read more about investing:
- How much money should I have saved by age 25?
- How to invest as a teenager in Canada
- Listen up Gen Z: How to invest as a young person
- How to stay invested in U.S. stocks without the tech overweight