Every time the market drops, some skittish investors get the impulse to sell their equities. Here's what the data—and your long-term goals—actually say.
When markets fall sharply, pulling your money out feels like the smart, protective move. But the short answer is: it usually isn’t. For most investors, selling during a downturn locks in losses, triggers tax consequences, and means missing the recovery that historically follows.
The real question isn't whether to sell. It's whether your portfolio is built to handle what markets always eventually do: move.
Not sure if your portfolio is built to handle volatility? A Certified Financial Planner® professional can review your investment strategy and help you make a confident, informed decision. Book a free strategy session →
Why the urge to sell feels so rational
The feeling of needing to act is not the same as the need to act. When portfolios drop, our instinct is to stop the bleeding. But financial research consistently shows that emotional selling produces worse outcomes than staying the course.
Stocks experience average intra-year declines of roughly 14%, yet still produce positive annual returns about 80% of the time. Volatility isn't a warning sign, it's a normal feature of long-term investing.
Right now, in 2026, there's plenty fueling investor anxiety: Geopolitical conflict, economic uncertainty, and daily headlines tracking every market move. That backdrop makes the urge to sell feel especially justified. That’s why when it comes to your long-term investments, we encourage our members to tune out the noise.
What history actually shows
Every major market disruption of the past 30 years—the dot-com crash, the 2008 financial crisis, the COVID-19 shock, the "Liberation Day" tariff swings—eventually recovered. In each case, investors who stayed invested came out ahead of those who didn't.
The investors who sold to "wait it out" often missed the strongest days of the rebound. Those best days tend to cluster immediately after the steepest drops, meaning the people most motivated to exit are the ones most likely to miss the recovery.
Missing just 10 of the market's best days over a 20-year period can cut your total returns in half.
Timing the market requires being right twice: when to get out, and when to get back in. Even professional fund managers rarely do this consistently.
When pulling money out actually makes sense
Staying invested is the right call for most people most of the time. But there are situations where selling is genuinely the right move.
You need the money soon. If you're within one to three years of needing to draw from your investments, that money shouldn't be exposed to market swings in the first place. Near-term expenses belong in stable, liquid assets, and if they aren't, that's the problem to fix.
Your allocation no longer reflects your risk tolerance. If a 10% drop is making you lose sleep, your portfolio may be taking more risk than you're actually comfortable with. The answer isn't to sell everything. It's to rebalance into an allocation you can hold through the next downturn.
Your financial situation has materially changed. A job loss, a major unexpected expense, or a significant life event may require you to access funds. In that case, sell strategically: Start with your steadiest performers, avoid locking in your largest losses, and withdraw only what you need.
What doesn't belong on this list: A scary news cycle, a bad week in the market, or a feeling that things might get worse before they get better.
What you should actually be doing right now
Market volatility isn't a reason to sell. It is a reason to pressure-test your plan.
- Check whether your short-term needs are covered. We recommend at least three to six months of an emergency fund and any liquidity needed in the next 1-3 years held outside of equities, but personal financial needs will always vary. If your cash needs for the next one to three years are held in liquid, stable assets, your investment portfolio can afford to ride this out. If they aren't, address that gap — but don't confuse a liquidity problem with an investment problem.
- Review your asset allocation. Portfolios drift as markets move. A downturn is a natural moment to rebalance back to your target allocation — which systematically does what everyone claims they want to do: sell high and buy low.
- Consider tax implications before making any moves. Selling in a taxable account locks in losses and may create a taxable event. Strategic tax-loss harvesting can be smart. Reactive selling rarely is.
- Get clear on what you're actually solving for. If the goal is long-term wealth, short-term volatility is the price of admission. If the goal is peace of mind, a plan you trust is the solution.
A practical framework before you decide anything
Before making any moves, run through these four questions:
- Do I need this money within the next three years? If no, this is not a financial emergency.
- Is my portfolio diversified across asset classes, sectors, and geographies? If not, rebalancing—not selling—is worth exploring.
- Am I selling because my plan has changed, or because the market has? One is a reason to act. The other rarely is.
- Have I talked to someone who understands my full financial picture? An investment decision doesn't exist in isolation from your taxes, income, goals, or timeline.
The behavioral edge: why a CFP® professional matters most in moments like this
Most of the long-term value of working with a financial professional isn't in picking the right investments. It's in behavioral coaching: Helping you stay steady when markets make selling feel like the only rational choice.
Vanguard's research found that professional portfolio guidance can add approximately 3% per year in net returns. About half of that comes from behavioral coaching alone.
At Domain Money, our CFP® professionals build portfolios around your actual goals, your actual time horizon, and your actual risk tolerance—not generic benchmarks. When volatility hits, that preparation is what keeps a plan intact.
Because we charge a flat membership fee with 0% AUM fees, we're never incentivized by the size of your account. Our only job is to help you make the best decision for your situation.
The bottom line
Pulling money out of the stock market during a downturn can feel like taking control. In most cases, it's the opposite.
The investors who come out ahead over decades are the ones who stay invested, stay diversified, and stay anchored to a plan built for the long run—not one built for last week's headlines.
If you're feeling uncertain about your current portfolio, that's worth paying attention to. Not because you should sell, but because it's a signal that your plan may need to be clearer, your allocation may need adjusting, or your strategy may benefit from a second set of eyes.
That's exactly what a CFP® professional is for.
Ready to pressure-test your investment strategy? Book a free strategy session at domainmoney.com to talk through your portfolio with a CFP® professional who puts your goals first.
Frequently Asked Questions
Should I pull my money out of the stock market right now?
For most investors, no. If you don't need the funds within the next one to three years and your portfolio is diversified, staying invested is typically the stronger long-term move. Selling during a downturn locks in losses and often means missing the recovery. The better question is whether your portfolio still aligns with your goals and timeline, and if it doesn't, that's worth addressing with a financial professional.
What happens if I pull my money out of the stock market?
When you sell, you lock in whatever gains or losses exist at that moment. In a downturn, that usually means realizing a loss. You'll also face potential tax consequences in taxable accounts, and you'll need to decide when to reinvest, which requires correctly timing the market twice. Most investors who exit during downturns miss the subsequent recovery and end up worse off than if they'd held.
Is it smart to move investments to cash during a market downturn?
Holding some cash is smart financial planning. Moving everything to cash during a downturn usually isn't. Cash loses purchasing power to inflation over time, and savings rates rarely keep pace with long-term market returns. If cash feels safer right now, that may be a sign your portfolio was carrying more risk than you're actually comfortable with, which is worth revisiting with a CFP® professional.
How long does it typically take for the stock market to recover after a drop?
It varies, but historically, U.S. bear markets have lasted an average of around 11 months. Some recoveries happen within months; others take a few years. The investors who benefit most are the ones who stayed invested through the dip rather than waiting on the sidelines for the "right" moment to re-enter.
What should I do with my investments during market volatility?
Start by making sure your near-term cash needs are covered by liquid, stable assets. Check whether your portfolio has drifted from your target allocation and consider rebalancing. Think carefully about tax implications before making any moves. And if you're uncertain, talking to a CFP® professional is one high-value step you can take. That’s not because they'll predict what markets will do, but because they'll help you make a decision that's right for your specific situation.
Does Domain Money manage investments?
Yes. Domain Money's investment management service includes professional portfolio construction, ongoing rebalancing, tax-aware strategy, and CFP® professional oversight—all within a flat membership fee with 0% AUM charges. You can have Domain Money manage your assets directly, or keep your investments where they are and use us for strategy and guidance. Either way, you get a real CFP® professional who understands your full financial picture.
This article is for informational purposes only and does not constitute investment, financial, legal, or tax advice. Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Individual financial situations will differ. Please consult a qualified financial professional before making investment decisions.
While flat fee financial advisory services can offer benefits, they can also result in their own conflicts of interest such as discouraging smaller accounts. All fee structures have potential benefits depending on client situations.
