selective focus photography of graph by m. courtesy of Unsplash.

How to Handle Market Volatility: Lessons for 401(k) and IRA Investors from Real Estate Investors

Mark W. Vandenburg, Jr. |

Executive Summary

  • Understanding Market Volatility: Market downturns can trigger feelings of anxiety, rooted in our evolutionary instincts regarding loss and security.
  • Real Estate Investment Perspective: Real estate investors often take a calmer approach, as they are less affected by constant valuation updates. Their ownership remains unchanged despite market fluctuations.
  • Practical Considerations for Investors: 401(k) and IRA investors may benefit from adopting a long-term perspective, focusing on the number of shares held rather than short-term price movements. While this mindset has helped some investors manage emotions, all investments carry risks.

Last month, I hinted at discussing Money Maps, but given recent market volatility, I felt it was important to address this topic first. We’ll return to the mapping process in next month’s post.

During turbulent times, it’s common to tune into financial news more frequently. Sensational headlines can amplify fears, and conversations with friends often lead investors to check their portfolios more often. Seeing a decline in account balances can understandably create uncertainty.

First, it’s important to acknowledge that these feelings are natural. Research suggests that humans fear losses approximately twice as much as they enjoy gains. This instinctual response dates back to our ancestors, who had to navigate uncertainty for survival—a behavioral tendency that still affects us today.

Now, let’s consider how real estate investors often navigate volatility with a sense of calm. A key difference lies in the nature of their investments. Unlike stocks, bonds, or ETFs, real estate assets are not subject to real-time price updates. While platforms like Zillow and Redfin provide estimates, these figures are not adjusted minute by minute, which can reduce the stress of market fluctuations.

However, when you strip away constant price monitoring, the core principle of ownership remains the same. Holding a stock means owning a percentage of a company. If its market price declines, does that mean you own less? Consider this: if your home or rental property’s estimated value drops, do you own any less of the property itself? The answer is no. Similarly, in equity markets, if you hold shares in a company like Apple or an S&P 500 index fund, a price dip does not change the number of shares you own—unless you sell.

Of course, this does not mean all investments recover. Some companies may experience permanent declines, and diversification remains a key risk-management strategy. Additionally, while real estate values have risen in recent years, history shows that housing markets are also subject to downturns, as seen during the 2008 financial crisis.

For long-term investors, maintaining a disciplined approach—focusing on the number of shares owned rather than daily price fluctuations—can be a helpful strategy. Many investors find that tuning out short-term market noise helps them stay committed to their long-term goals.

Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, or legal advice. Investing involves risk, including potential loss of principal. Past performance does not guarantee future results. Always consult a financial professional before making investment decisions.