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You're not alone in thinking that managing your retirement savings in a down market is a challenge. In fact, you may be tempted to make immediate changes in hopes of protecting your investments. Acting too quickly may lead to making choices that don't align with your goals — and may even keep you from reaching them. Keep the following information in mind before making any moves.

What a volatile market means

Market volatility refers to when groups of stocks or bonds rapidly change price — up or down — over a relatively short time span.

Lower volatility

is when the price change is slower, less significant and over a longer period.

Higher volatility

is when the price change is faster, more significant and over a shorter period. Rapid price changes can impact the value of your retirement portfolio.

What a bear market means

A bear market is when the stock market experiences a sustained period of price declines. In fact, typically it describes a condition in which securities prices fall 20% or more from their most recent all-time high. A bear market does not guarantee that a recession will occur, and market corrections have always been temporary. A recession occurs when the U.S. economy has 6 consecutive months of negative growth.

How the market can affect your retirement portfolio

Whether you're in the midst of a volatile market, a bear market or a recession, the value of your retirement portfolio could be significantly affected. Watching your account total go up and down, or continue to go down temporarily for a period of time, isn't easy. But it's a normal part of investing in the markets. In fact, there have been periods of increased market volatility throughout the long history of the U.S. stock and bond exchanges.

S&P 500® performance after severe quarterly losses 1945 to present

Q3 1974 worst quarterly performance was -26% and return over the next 12 months was 32%. Q4 1987 worst quarterly performance was -23% and return over the next 12 months was 12%. Q4 2008 worst quarterly performance was -23% and return over the next 12 months was 23%. Q2 1962 worst quarterly performance was -21% and return over the next 12 months was 27%. Q1 2020 worst quarterly performance was -20% and return over the next 12 months was 54%. Q2 1970 worst quarterly performance was -19% and return over the next 12 months was 37%. Q3 1946 worst quarterly performance was -19% and return over the next 12 months was 1%. Q3 2002 worst quarterly performance was -18% and return over the next 12 months was 22%. Q2 2022 as of June 22 worst quarterly performance was -16%. Source for chart data: FactSet Research Systems, Nationwide IMG Competitive Intelligence Team.

Source for chart data: FactSet Research Systems, Nationwide IMG Competitive Intelligence Team

You may be wondering "But how bad are my losses going to be in this current market?" As the chart above illustrates, the second quarter of 2022 may be the ninth-worst quarter for the S&P 500 Index since World War II. However, in the 12-month periods following down quarters in the past, the benchmark stock index rose by an average of 26%.

This illustrates why investors should ignore short-term market noise and stay focused on their long-term investment strategy.

Tips on what to do in a down market

Refer to these 5 tips before deciding to take action in a down market:

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1. Resist the urge to do "something" right away

Don't let market fluctuations alone make you change investments. Remember, bad years are generally balanced by good years.
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2. Stay calm through the ups and especially the downs

Make sure you temper your expectations for growth. Your asset allocation should be based on return expectations needed to meet certain goals and objectives. If your portfolio includes stocks, down markets are already factored into your long-term return expectations.
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3. See the opportunity with market losses

By continuing to invest regularly during a down market, you'll often be able to buy more of your chosen investments with the same amount of money as before. Riding out the down market so that you can participate in the rebound should be the goal.
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4. Don't check your portfolio too often

Reviewing your allocations and making necessary changes periodically is smart, but checking too often may lead to hasty decisions that negatively impact your returns.
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5. Forget short-term losses in the past

Don't dwell on how much more your portfolio was worth at the time of its most recent high. Unless you sell investments or withdraw funds, the "losses" are only on paper. Long-term investing historically leaves plenty of time for the market to recover.

Of course, you should always keep in mind that investing involves risk, including the possible loss of principal.
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Need more tips on how to avoid emotional investing? Watch this video.