Fight Or Flight Doesn’t Work With Investing

By Alex Martinez on November 10, 2026

When investors open a monthly statement and see that their portfolio has declined, they rarely assume the decline is temporary.

They assume it will continue.

We tend to think in straight lines. If the market went down this month, we begin imagining it going down next month and the month after that. Then our fight-or-flight instincts take over and convince us that we need to do something.

Fight or flight may help keep us physically safe. It does not work particularly well with investing.

Markets do not move in straight lines. They cycle. Prices rise, expectations become too optimistic, conditions change, and prices fall. Eventually, businesses and investors adjust.

The event behind each decline is different. It might be an election, inflation, a war, a recession, interest rates, or concerns about artificial intelligence. Every time, investors find a new reason to say, “This time is different.”

The circumstances are always different. Human behavior rarely is. 

Volatility is not harmless, but it is also not the same thing as permanent loss. It is the movement in prices that investors generally must be willing to tolerate when pursuing returns above inflation and lower-risk investments.

Real risk takes several forms.

It is owning something you do not understand. It is not knowing why an investment belongs in your portfolio. It is being overly concentrated in one company, industry, or idea. For a retiree, it is being forced to sell stocks during a major decline because the next several years of cash flow were never properly planned.

That last risk can do real damage to a retirement plan.

This is why we generally aim to keep at least five years of anticipated portfolio distributions for retired clients outside the stock market, primarily in bonds and cash.

That does not prevent the stock portion of the portfolio from declining. It does not predict when the next bear market will begin or how long it will last. What it can do is give the stock portfolio time to weather a difficult period without forcing us to sell simply because a client needs income.

Five years also gives us time to adjust the financial plan and portfolio as conditions change.

The purpose is not to eliminate uncertainty. That is impossible.

The purpose is to avoid turning temporary volatility into permanent financial damage.

Investors often make their biggest mistakes after forgetting the reason they owned stocks in the first place. They abandon the financial plan, capitulate after prices have already fallen, and allow fear to dictate a long-term decision.

A portfolio being down does not necessarily mean the investments are bad.

It also does not automatically mean everything should be held forever. Individual companies can fail. Businesses can lose their competitive advantages. An investment thesis can be wrong. That is why understanding what you own and remaining diversified matter.

But a declining price, by itself, is not proof that a sound investment has become a bad one.

The opposite mistake is becoming so afraid of volatility that a portfolio is unable to keep pace with inflation. A portfolio can appear safe because its value moves very little while quietly losing purchasing power over time. For a retirement lasting several decades, that can be enormously costly.

No one can consistently predict the economy, elections, interest rates, or the market’s next move.

That is exactly why we plan.

A financial plan provides a zoomed-out perspective when the monthly statement and the latest headline tempt us to focus on what happened yesterday.

Uncertainty is unavoidable. Panic is not.

Please feel free to contact me or my team anytime you have a question about your plan or portfolio.

Invest with Intention,

Jake