Enjoy those lower stock prices, honestly.

Volatility has returned in a big way. With volatility comes lower stock prices, and that can be good news if you know how to harness your emotions. Lower stock prices can help you build incredible wealth. But learning how to stay the course through market corrections and bear markets is essential. Understanding how the stock markets work and how your brain processes risk can help you make the most of the situation. With awareness comes preparedness. Then, you might ‘enjoy’ those lower stock prices. Who doesn’t like a sale?

First thing – Zoom out

Look at the big picture, the long game. Equity markets are incredible wealth builders. In fact there’s nothing better for ‘average’ folks. If you had been investing $1000 per month in equities over the last 25 years, you’d have a portfolio well over $1,000,000.

Sure you could start the next Shopify, but other than that stocks and REITs are it.

Here’s a long term chart for U.S. stocks – the grey bars are the recessions.

For more perspective, let’s take a look at Canadian stocks (XIU-T) from the year 2000, and through two of the biggest corrections in stock market history.

That recent correction is just a blip, even though to some it feels like a roller coaster ride, and a scary drop. Here’s a 20-year chart for U.S. stocks.

Stock market declines are normal and expected

If we think of stock markets as a roller coaster ride that ascends into the clouds, we have to accept the scary ride as the price of entry. We’re mostly going up, but the big drops can be gut wrenching. Remember, you enter the roller coaster with empty pockets and exit (likely and hopefully) rich and financially secure.

Here is some very interesting framing, for Canadian stocks.

Severe bear markets, let’s say 40% to 55% declines are even more rare but they do show up and we have to be prepared. We experienced 50% declines in the financial crisis (2008-2009) and the dot com crash (2001-2003). The 1970’s delivered stagflation and a severe decline as well in the area of 45%. And of course there was the Great Depression of the 1930’s.

Here’s a good way to frame risk, by year. Or think of that as the roller coaster ride in chart form. Green = fun. Red = hang on.

Over time stock markets deliver about a 10% average annual return before inflation. Factor in inflation and we’re in the 6.5% annual area. But from the graphic above we can see there is nothing average about stock market returns. We rarely get a year of 10%. “Average” hardly shows its face.

And the good news on those red correction years, is that they are almost always followed by outsided gains. We need to be around for those years. And keep in mind that your return on the money invested in the red years is amplified.

Warren Buffett on sale prices

Warren Buffett reminds us that we should like when our stocks go on sale.

No one knows the exact timing but Charlie Bellilo offered this table. Historically when we’re at this level of volatility very good returns are not far off. We need the standard disclaimer here – past performance does not guarantee future returns.

The $VIX ended the week at 45.3, among the highest weekly closes in history.

What has happened in the past following the highest $VIX levels?

Stocks rallied 100% of the time over the next 1, 2, 3, 4, 5 years with returns far above historical averages.https://t.co/l5IYmkeySJ pic.twitter.com/dLB7ekFPJA

— Charlie Bilello (@charliebilello) April 5, 2025

Bear markets return stocks to their rightful owners

That is a harsh reality. The majority of investors take on too much risk; they buy a ticket for the wrong roller coaster. Many of them should have been on the kiddie coaster, but instead they hopped on the Leviathan at Canada’s Wonderland.

… they’ll be face-to-face with a steep 80 degree drop. Before they know it, they’ll be racing down the track at incredible speeds reaching up to 148 kilometers an hour.

Those investors who cannot handle the ride ask to get off after the first big drop, and they’ll pay handsomely. They’ll sell you their portfolio for 50 cents on the dollar. Currently rich and the ‘future rich’ investors say thank you very much.

I’m not belittling their unfortunate experience, but market corrections will separate the winners from the losers. It is a transfer of wealth. They were just borrowing the company ownership. They were not able to hang in there for the big payday.

From awareness comes preparedness. If you are aware of how stock markets work, you might be able to join the winning team.

Know your risk tolerance

There is nothing more important than investing within your risk tolerance level. The only good investment plan is the one that you can execute.

Can you handle a 10% correction, 20% correction, 30% correction, 40% correction, 50% correction? Where would you tap out? If you know your risk tolerance you can then create a portfolio that might fall within your comfort zone. Only comfortable with a 20% decline? You might look to a very conservative portfolio. You’re not going to earn 10% average annual over time, but making 5% annual is much better than creating permanent losses of 30%, 40% or 50% in a major correction.

You can check out a simple table on risk tolerance and appropriate portfolios in this post for the all-in-one Canadian asset allocation ETFs.

You can also explore the many online risk assesment questionnaires.

You don’t know what you don’t know

But here’s the risk conundrum, if you’re new to investing, if you’ve never invested through a major stock market correction, you don’t know your tolerance for risk. You can only guess. In search of an anology I found this – ‘there’s only one way to know what if feels like to kiss a girl.’

Risk is a feeling, an emotion. And you don’t know it until you’ve lived it.

So, you have to take a leap into the unknown. That’s just the way it is. You can make your best guess and hope you understand what it will feel like to watch your portfolio decline by 20% or more. You’ll learn on the fly.

Test drive your emotions

Given that, you might begin at a lower or moderate risk level to gauge your feelings and reactions. Race car drivers don’t start by hoping in an F-1 car. They start in go-karts, and work their way up through several series.

As an investor, you can work your way up as well. You can learn to deal with investment ‘stress’ while keeping in mind the benefit of accepting and embracing that stress.

If you’re investing smaller amounts and have a smallish portfolio and you think you have a higher tolerance for risk you might go all in on equities. If you discover that you’re not the next Warren Buffett, at least the lesson was not too expensive. You can more than make it up in the future while embracing the investment plan you can execute.

Along that same line of of thought, even if you have considerable cash on the sidelines, you can use a test investment account with a modest amount. And use real money, not a portfolio simulator.

And of course, the investment portfolios must fit within the greater financial and life plan.

Keep is simple. Keep it cheap

I would suggest that accumulators consider a simple but effective core ETF portfolio approach. For more on that strategy have a read of – What is index investing?

For more ‘zoom out’ perspective here’s iShares XBAL-T over the last 10 years.

Once again, you could use one of the asset allocation ETFs.

If you have any questions on risk and portfolio selection feel free to reach out to me via the Contact Dale button at the top of this post. And please drop your ideas and questions in the comment section of this post, I will reply.

The Sunday Reads

At Findependence Hub why market timing doesn’t work.

Dan at Stocktrades offers – What is the state of these Canadian banking institutions now?

Here’s my take on how to invest in Canadian banks.

Bob at Tawcan has a Q&A with Brian from Labour to Leisure. And here’s the link to Brian’s blog.

Like a large segment of Canadian investors, Brian focuses on the dividend and income stream. That can lead to significant underperformance. It is very important to separate the accumulation stage and retirement stage.

Go for growth. More money will create or buy more retirement income.

More money is more better

And then in retirement the dividends are not of special importance. A share sale and dividends are equal. Dividends provide no added protection from sequence risk. One might consider the beneficial tax treatment for qualified Canadian dividends in some circumstances. But risk management, diversification and the greater financial and cash flow plan should drive the bus.

And of course we always check in on Dividend Hawk and his personal portfolio news, plus Seeking Alpha reads of the week.

Kyle at Million Dollar Journey offers his thoughts on the Trump tariff trade war.

Thanks to Hawk for sharing my latest on Seeking Alpha – The S&P 500 posts worst quarterly performance since 2022. The U.S. Dollar falls 5%. In that post you’ll see that my long-tabled ideas for managing risk and inflation by way of sector ETFs went 4 for 4 in the first quarter.

Healthcare, Consumer Staples and Utilities led the way. Of course how to manage market risk becomes paramount in retirement. It’s a common theme in Retirement Club. Canadian utilities (ZUT-T) and staples (XST-T) have also held up very well.

You’ll find more on successful risk management in last week’s Sunday Reads.

Join Cut The Crap Investing

You can follow this blog, it’s free. Newsletters, plus other free content and ‘ideas’ will be delivered to your email inbox. Enter your email in the subscribe area, or ‘join us today’ on the home page.

ETFs / Stock Portfolios / Retirement Strategies / Wealth Creation/ Retirement Club

Thanks Partners

Earn a break on fees by way of many of these partnership links.

CANADA’S TOP-RANKED DISCOUNT BROKERAGE

Cut the Crap Investing readers can earn a break on fees at Questrade by way of that partnership link. At Questrade, you can buy ETFs for free. It’s a great place to build your stock portfolio.

Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and low-fee ETF portfolios all at one shop. You can have it all.

Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.

OUR SAVINGS ACCOUNTS

Make your cash work a lot harder at EQ Bank. RRSP and TFSA account rates are at 1.75%, other savings rates up to 3.0%. You’ll find some higher rates on GICs up to 3.60%. They also offer U.S. dollar accounts at 3.0%. We use EQ Bank, they have been awesome.

OUR CASHBACK CREDIT CARD

We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …

The Tangerine Cash Back Credit Card

For March we received $41.61 in cash. You can select 3 categories for 2% cash back. The rest pays at 0.50%. That’s one of our lowest spending levels of the last several years. Our fuel bill is way down and so is our grocery bill.

That cash went into my TFSA account to buy some HUTS.TO and VDY.TO.

Retirement Club

There are a few spots left for the second group of Retirement Club. We set sail later this month. It is a series of monthly Zoom Presentations, newsletters, plus a secure and private online space where we learn, share ideas and chat. Make sure you’re doing retirement right. It’s also suitable for those who are approaching retirement. Use Contact Dale if you’d like more info.

While I do not accept monies for feature blog posts please click here on the mission and ‘how I might get paid’ disclosures. Affiliate partnerships help me (try to) pay the bills for this site. But they don’t, ha. That will allow me to keep this site free of ads and easy to read.