Reflecting on Risk: Lessons from 2025 for a Stronger 2026

Did 2025 Make You Rethink Your Risk Tolerance?
When markets swung wildly in 2025, how did it make you feel? For many investors, those sharp ups and downs revealed that their true comfort with risk wasn’t quite what they had expected. It’s one thing to imagine how you’ll react when markets are calm, but it’s another to watch your account balances swing in real time. If you felt more anxious, more resilient, or simply surprised by your own response, you’re far from alone. Real-life volatility has a way of showing us our true feelings about risk—often in ways that theory and questionnaires never capture.

What Is Risk Tolerance—And Why Does It Matter?
Risk tolerance isn’t just about chasing high returns—it’s about what lets you sleep at night. It means knowing how much market fluctuation you can truly handle, both financially and emotionally, and being able to stick with your plan even when things get rocky. Your risk tolerance works together with your risk capacity (what you can afford to risk based on your income, savings, and goals), your time horizon, and your ability to bounce back from losses. When these pieces don’t line up—like having an aggressive portfolio but needing your money soon—market swings can feel a lot more stressful than you’d expect.

Lessons from 2025: Expectations vs. Reality
When the market dropped, did you stick to your plan or feel pulled to make changes? Maybe you found yourself watching the markets more closely, feeling losses more deeply, or even wanting to move to cash for peace of mind. Or perhaps you felt unexpectedly calm, or saw the downturn as a chance to buy. Did you notice your focus shift from the long term to the next few days or weeks? These real reactions often reveal more about your true risk tolerance than any quiz or theory can. Take a moment to reflect on how you actually behaved in 2025—your answers can show whether your current portfolio still fits who you are as an investor.

How to Align Your Investments with What You’ve Learned
Be honest with yourself about what made you feel anxious—or confident—during the market swings of 2025, and how long those emotions lasted. Take a fresh look at your portfolio: does it still match your comfort with risk, your time frame for each goal, and your need for ready cash? Has anything changed since you first set things up? Maybe it’s time to tweak your mix of stocks and bonds, add more diversification, or keep a bit more cash on hand for peace of mind. The goal isn’t to avoid all risk—it’s to build a plan you can stick with in any market, so you’re less tempted to abandon your strategy the next time things get turbulent.

Practical Steps for 2026 and Beyond
Have an open conversation with your DWAM financial professional about your goals, your time frame, and how your portfolio is set up. Be honest about how you truly felt and acted during 2025—not just how you think you “should” feel about risk. Let those real experiences guide you as you and your advisor create a plan that’s both realistic and resilient, with clear steps for how you’ll handle future market swings—whether that means rebalancing, adding to cash, or simply staying the course. The aim isn’t to avoid all risk, but to set yourself up for long-term success by staying invested—even when the ride gets bumpy. Volatility can be a valuable chance to revisit and refine your strategy, so it always fits who you are as an investor—now and in the years ahead.

Disclosure
This material is for informational and educational purposes only and is not intended as individualized investment, tax, or legal advice. It does not constitute an offer to sell or a solicitation of an offer to buy any security or investment strategy, and it should not be the sole basis for any investment decision. Investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy, including diversification or asset allocation, will be successful or protect against loss in declining markets. Past performance is not indicative of future results, and market conditions can change rapidly. Any references to market conditions in 2025 are illustrative and may not represent future periods; investors should consider their own circumstances and consult with a qualified financial professional before making any investment decisions.​

Sources

• FINRA – Know Your Risk Tolerance
  https://www.finra.org/investors/insights/know-your-risk-tolerance​
• FINRA – Risk (Investing Basics)
  https://www.finra.org/investors/investing/investing-basics/risk​
• SEC – Assessing Your Risk Tolerance (Investor.gov)
  https://www.investor.gov/introduction-investing/getting-started/assessing-your-risk-tolerance​
• SEC – Financial Navigating in the Current Economy: Things to Consider Before You Make Investing Decisions
  https://www.sec.gov/investor/pubs/financialnavigating.htm​
• SEC – Don’t Panic, Plan It!
  https://www.investor.gov/additional-resources/spotlight/formerdirectorlorischock-directors-take/dont-panic-plan-it​
• SEC – Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing
  https://www.sec.gov/about/reports-publications/investorpubsassetallocationhtm​
• FINRA – World Investor Week 2025
  https://www.finra.org/investors/insights/world-investor-week-2025​

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