Volatility is the price of admission for investing in growth assets. Prices that can rise strongly over the long run can also fall hard over weeks or months, and nobody can reliably say in advance when that will happen. What you can control is how you respond. This guide uses more than three decades of daily S&P 500 and VIX data from our market-data feed to show how common sharp declines are, what reacting to them has cost, and which habits official investor-education bodies recommend. All market figures below are calculated by Finbexo and refresh automatically; the latest data point is from 27 Oct 2026.

The short answer

  • Expect declines. In 21 of the 35 full calendar years from 1991 to 2025, the S&P 500 fell at least 10% from a high at some point. Yet the index ended 26 of those years higher.
  • Keep near-term cash out of the market. Money you need within a few years should not depend on stock prices.
  • Match your mix to your time horizon, diversify across and within asset classes, and rebalance on a schedule.
  • Automate contributions so that you keep investing without having to decide when.
  • Avoid forced selling. Leverage, margin and CFDs can turn a temporary fall into a permanent loss.
  • Do not try to dodge the worst days. The best days often arrive right after them.

What volatility is and how it is measured

Volatility describes how widely prices swing. The most common measure is the standard deviation of returns. Over the past year, the S&P 500’s daily price returns had an annualised volatility of 12.7%, compared with 18.0% on average since 1990. Roughly, that long-run figure means a typical year’s outcome can differ from the average by that many percentage points in either direction.

The best-known gauge of expected volatility is the Cboe Volatility Index, or VIX. Cboe calculates it from the prices of S&P 500 index options, so it reflects how much movement options traders are paying to protect against or bet on over roughly the next 30 days. Because investors pay up for protection when they are nervous, the VIX is often called the market’s “fear gauge”.

  • Latest VIX close: 17.51 on 28 Oct 2026, higher than 50% of all daily closes since 1990
  • Long-run average / median: 19.4 / 17.6
  • Days below 20: 63%  ·  days at 30 or above: 8%
  • Highest close: 82.69 on 16 Mar 2020
  • S&P 500 last close: 7,722.60 (27 Oct 2026), 1.2% below its record close of 7,818.93 on 6 Oct 2026

Declines are normal: the S&P 500 record

A useful way to calibrate expectations is to compare each year’s final return with the largest drop from a high during that year. Across 35 full years, the median intra-year decline was 11.2%. Declines of 10% or more happened in 21 years, and 13 of those years still finished in positive territory. In other words, a double-digit fall during a year has been ordinary, and it has often not decided how the year ended.

YearPrice returnLargest decline within the year
2026 (to 27 Oct 2026)+12.8%-9.8%
2025+16.4%-21.3%
2024+23.3%-9.7%
2023+24.2%-10.9%
2022-19.4%-27.5%
2021+26.9%-5.9%
2020+16.3%-35.4%
2019+28.9%-7.6%
2018-6.2%-20.2%
2017+19.4%-3.3%
2016+9.5%-11.2%
2015-0.7%-12.5%
2014+11.4%-9.8%
2013+29.6%-7.5%
2012+13.4%-10.9%

Price return excludes dividends, so the total return an investor received was higher in every year. The decline column measures the biggest fall from any high to a later low within the same calendar year, using daily highs and lows.

Bear markets since 1990

Most declines are corrections that recover within months. A few become bear markets, which are usually defined as a fall of 20% or more from a record. Our closing-price data shows these episodes:

Record closeLow closeDeclineBack to the record
24 Mar 20009 Oct 2002-49.1%30 May 2007
9 Oct 20079 Mar 2009-56.8%28 Mar 2013
19 Feb 202023 Mar 2020-33.9%18 Aug 2020
3 Jan 202212 Oct 2022-25.4%19 Jan 2024

Recovery times varied widely, from a few months to several years on a price basis. That variation is the main reason why money needed in the next few years should not depend on stock prices. It also explains why investors who are still adding money regularly have historically been in a better position during long declines than investors who need to withdraw.

What panic selling can cost

The urge to sell during a sharp fall is understandable. The problem is that the market’s strongest days tend to cluster around its weakest ones. Among the 10 best days for the S&P 500 since 1990, 6 came within about two weeks (10 trading days) of one of the 10 worst days. An investor who sold after the bad days was likely to be out of the market for the rebound.

Here is what that means in money. Using index price returns only, from 2 Jan 1990 to 27 Oct 2026:

$10,000 in the S&P 500Ending value
Fully invested every day$214,702
Missing the 10 best days$95,597
Missing the 20 best days$55,440
Missing the 30 best days$34,842

The comparison is deliberately simple. It ignores dividends, costs and taxes, and it assumes the missed days earn nothing. Nobody misses exactly the best days, and an investor who also avoided some of the worst days would have done better. Still, the clustering shown above makes that hard to achieve in practice. The best days in the record are: 13 Oct 2008 (+11.6%), 28 Oct 2008 (+10.8%), 9 Apr 2025 (+9.5%), 24 Mar 2020 (+9.4%), 13 Mar 2020 (+9.3%), 23 Mar 2009 (+7.1%), 6 Apr 2020 (+7.0%), 13 Nov 2008 (+6.9%), 24 Nov 2008 (+6.5%), 10 Mar 2009 (+6.4%). Most of them fell inside the 2008–2009 financial crisis, the March 2020 pandemic crash or the April 2025 tariff sell-off, which were exactly the periods when selling felt safest.

High VIX readings and what followed

A spike in the VIX feels like a warning, but historically it has often marked periods when future returns were above average. In our data, the S&P 500’s median price return over the 12 months after a VIX close of 30 or more was +22.5%, and the following 12 months were positive 87% of the time. For comparison, the median 12-month return after any day was +11.9%, with gains 81% of the time.

These numbers come from 734 trading days with a VIX close of 30 or more that already have a full year of data after them. Many of those days come from the same few crises, and the 12-month windows overlap, so the sample is far smaller than it looks. The lesson is not that a high VIX is a buy signal. It is that periods of extreme fear have not, on average, been good times to abandon a long-term plan.

A practical plan for volatile markets

1. Know your time horizon and keep a cash buffer

The SEC’s investor education office says that your time horizon and your ability to tolerate risk should drive your asset allocation. Money for an emergency, a house deposit or next year’s tuition belongs in cash or short-term savings, not in stocks or crypto. Once you have that buffer, a market fall becomes something you can wait out instead of a reason to sell.

2. Choose an asset mix you can stick with

Asset allocation means splitting money between categories such as stocks, bonds and cash. The SEC guide notes that, historically, the returns of the three major asset categories have not moved up and down at the same time, so a mix can soften the swings of any one of them. Diversify within each category as well, for example with broad index funds rather than a handful of single stocks. A good test is whether you would keep the same mix after a 20% to 30% fall in stocks, because the table above shows that such falls do happen.

3. Rebalance on a schedule

Over time, gains and losses push a portfolio away from its target mix. Rebalancing means trimming what has grown and adding to what has fallen, either on a calendar schedule or when an allocation drifts by a set amount. The SEC guide describes both approaches: a regular interval, such as every six or twelve months, or a threshold you choose in advance. If you are still contributing, you can also rebalance by directing new money to the underweight category, which avoids selling. Rebalancing turns volatility into a rule-based process and stops one asset from quietly dominating your risk.

4. Invest regular amounts

Dollar-cost averaging means investing a fixed amount at regular intervals regardless of price, as with a monthly contribution to a pension or an index fund. The SEC’s Investor.gov suggests it as a way to keep following your plan when the market swings up and down. FINRA adds an important caveat: if you already have a lump sum, investing it gradually has often produced lower returns than investing it all at once, because markets have tended to rise over time. The main benefit is behavioural, because it keeps you investing without having to make a timing decision.

5. Size risky positions so that you can hold them

Concentrated positions, leveraged products and assets such as crypto can move far more than a broad index. Our ETH price analysis shows monthly swings that would be extreme for stocks. Keep any such position small enough that a large fall would not force you to sell other holdings or change your plans. With margin accounts and CFDs, a fall can trigger a margin call that closes your position at the worst moment.

6. Write your rules down before you need them

The SEC’s “Don’t Panic, Plan It!” message is simple: make a risk-appropriate, diversified plan and avoid rash decisions when markets are volatile. Put the plan in writing, including your target mix, your rebalancing rule and your contribution schedule. When markets turn rough, your job is to follow the plan, not to rewrite it.

Mistakes to avoid

  • Checking prices constantly. Frequent checking magnifies the emotional weight of normal daily moves.
  • Acting on a single headline. Forecasts of crashes and rallies are cheap. Ask what data supports them.
  • Selling everything and waiting for “clarity”. Markets usually recover before the news improves, which is why the best days cluster near the worst ones.
  • Adding leverage to “buy the dip”. Borrowed money removes your ability to wait.
  • Ignoring costs and taxes. Frequent trading in volatile markets adds both.

None of this means volatility is harmless. It means the main risk for most long-term investors is not the decline itself but a decision made during the decline that cannot be undone. If your circumstances are complex, a licensed, fee-transparent adviser can help you set the plan.

Methodology and limitations

We use daily data for the S&P 500 index (^GSPC) and the Cboe Volatility Index (^VIX) from the Yahoo Finance chart API, the same provider behind our site ticker, starting on 2 January 1990. Returns are price returns and exclude dividends. Annual returns compare year-end closes, and intra-year declines use daily highs and lows within the calendar year. Bear markets are closing-price falls of 20% or more from a record close, with recovery dated to the next record close. “Missing the best days” removes the highest daily returns from a buy-and-hold calculation. Forward returns use 252 trading days. Volatility is the annualised standard deviation of daily log returns. The calculations refresh at most every 12 hours. History does not guarantee future results.

Frequently asked questions

How do you deal with market volatility?

Decide on a plan before markets get rough: keep money you will need soon out of volatile assets, hold a diversified mix that matches your time horizon, rebalance on a schedule, consider investing regular fixed amounts, and avoid leverage you cannot hold through a fall. Then follow the plan rather than reacting to headlines.

How often does the stock market fall 10%?

Using S&P 500 data, the index fell at least 10% from a high at some point during 21 of the 35 calendar years from 1991 to 2025, and 13 of those years still ended higher. The median intra-year decline was 11.2%.

What is a normal VIX level?

Since 1990 the VIX has averaged 19.4, with a median of 17.6. It closed below 20 on 63% of days and at 30 or higher on 8% of days. On 27 Oct 2026 it closed at 17.5.

Should I sell when the market is volatile?

Selling after a fall locks in the loss and makes it hard to get back in. In our S&P 500 data, 6 of the 10 best days since 1990 came within two weeks of one of the 10 worst days, so investors who sell in a panic often miss the rebound. Whether to change your portfolio depends on your goals and time horizon, not on the latest move.

Does a high VIX mean stocks will fall further?

Not necessarily. In our data, the median S&P 500 price return over the 12 months after a VIX close of 30 or more was +22.5%, compared with +11.9% after all days. The sample is dominated by a few crises and the periods overlap, so this is not a timing signal.

Sources and method