How I Made $5000 in the Stock Market

Volatility Is Back in the Stock Market. Here’s the Zen Way to Handle It.

Oct 16, 2025 01:45:00 -0400 by Elizabeth O’Brien | #Retirement #Feature

Adding some bonds and moving some assets out of tech may help if the market slumps again. (Dreamstime)

Key Points

Market volatility is back, raising the volume on a news cycle that never rests. But a well-constructed portfolio can help retirees sleep at night.

The stock market had been remarkably docile before a sharp move this past Friday. The S&P 500 fell 2.7% that day, ending a streak of 33 trading days without a move of 1% or more in the index—the longest such run since January 2020.

Investors had perhaps grown complacent about President Donald Trump’s trade war and its impact on the economy. Renewed trade tensions may shake that complacency. It’s a good time to take stock of your portfolio, says Carlton Davis, fixed-income portfolio manager at Chevy Chase Trust. “Understand if you’re positioned the way you think you are,” he says.

A big debate is whether the S&P 500 is hurtling toward another tech crash, similar to the dot-com bust at the start of the century. While no one can predict moves in the market, it would certainly suffer if tech wavers. More than 25% of the S&P 500’s market cap is in just four stocks: Nvidia, Microsoft, Apple, and Alphabet. If your entire stock portfolio is in the S&P 500, you might find that you’re too exposed to tech for comfort.

The goal is to create a diversified portfolio that will allow you to tune out the noise. Exactly what that looks like depends on your goals and risk tolerance, but there are some parameters to keep in mind.

Stocks

Through last year, investors could be forgiven for thinking that diversification was dead. This year has revived the case for spreading your assets beyond the S&P 500. Just remember, it isn’t the number of funds you own that makes for a diversified portfolio—it’s the lack of overlap and relative noncorrelation among them.

The MSCI ACWI Ex-USA index, an international index that excludes U.S. stocks, is up about 26% year to date, versus 13% for the S&P 500. Some pros recommend that investors keep around a quarter of their equity assets in non-U.S. stocks.

Another way to diversify is to own an equal-weighted index. The S&P 500 is market-cap-weighted, so companies occupy a place in the index according to their size. But even cap-weighted S&P 1500 funds, owning far more stocks, hold more than 40% in tech.

For a less concentrated approach, consider an equal-weighted fund such as the Invesco S&P 500 Equal Weight exchange-traded fund. No stock is more than 2% of its assets. It isn’t doing as well as the S&P 500 because Big Tech barely registers in the fund, but it’s up a respectable 9% for the year.

Gold has had a spectacular run, up 57% this year. Rather than chase that performance, consider a fixed allocation of around 5% to gold as “fire insurance” for your portfolio, says Brian Levitt, global market strategist at Invesco. The SPDR Gold Shares ETF is an easy way to access it.

Bonds

Retirees may still feel burned by 2022, when bonds tanked nearly as much as stocks during a pandemic-induced inflation shock that prompted the Federal Reserve to hike interest rates sharply. Outside of such relatively rare circumstances, higher-quality bonds can be counted on to reduce volatility and temper risk in your portfolio, Levitt says.

There’s no need to get fancy, says Christine Benz, director of personal finance and retirement planning at Morningstar. Rather than paying attention to the latest inflation data or trying to guess rate movements, she recommends a goals-based approach to your bond allocation: Take the annual amount you’ll need to withdraw from your portfolio in retirement, multiply it by 10, and keep that amount in short-term and intermediate term high-quality bonds. Having 10 years’ worth of living expenses insulated from market movements provides peace of mind.

For low-cost exposure to fixed income, the Dimensional Core Fixed Income ETF invests in high-quality, intermediate-term bonds, while the Schwab Short-Term U.S. Treasury ETF invests in short-term government bonds.

Don’t wait until you’re retired to start building your cash cushion, Benz says. Many people retire earlier than planned due to layoffs or health concerns, and you don’t want to be forced into selling equities, potentially at a loss, to cover living expenses.

Once you’ve constructed your sleep-at-night portfolio, leave it alone. Many investors can do just fine with an annual check-in, Benz says: “Less is more.”

Write to Elizabeth O’Brien at elizabeth.obrien@barrons.com