Rising geopolitical conflict in the Middle East and policy uncertainty related to the global trade war has triggered an uptick in stock market volatility in 2025. One popular volatility yardstick, the Chicago Board Options Exchange's CBOE Volatility Index (ticker: VIX), has spiked multiple times so far this year, including a jump to its highest level since the 2020 pandemic.
What Is VIX?
The VIX is a market index designed to measure the expected volatility of the S&P 500, the prime benchmark for the U.S. stock market as a whole. The VIX represents the market's expectations for volatility over the coming 30 days, and investors use the VIX to get a sense of investor sentiment and market risk.
The VIX represents an annualized volatility of a hypothetical S&P 500 stock option with a 30-day expiration date, and it is calculated based on the prices of near-term S&P 500 options traded on the CBOE. The VIX is commonly referred to as the "fear index" or the "fear gauge," and it is typically inversely correlated to the price of the S&P 500. When the VIX spikes, the S&P 500 tends to drop.
While a rise in stock market volatility can be scary, it is no cause for panic.
In fact, there are simple ways you can protect your portfolio during periods of market volatility. Here are five easy tips for long-term investors to help navigate a volatile market:
Sell Some of Your Stock
If you are losing sleep at night over stock market volatility, it may be a red flag that you have too much money in the stock market. No one should invest more money in the stock market over the short term than they are willing to lose. There is no such thing as a guaranteed investment, but selling stocks and putting the money into less-volatile bonds or even certificates of deposit can help eliminate some of the stresses of market volatility.
Hedge Your Bets Through Diversification
There are plenty of strategies for investors to hedge against unexpected spikes in volatility. The iPath S&P 500 VIX Short-Term Futures ETN (VXX) is a fund that tracks the VIX and increases in price along with market volatility. The VXX ETN is up about 6% so far this year, and investors have used it as a hedge against a sharp market sell-off if geopolitical conflicts suddenly escalate. Other popular ways of hedging stock holdings include inverse exchange-traded funds and buying put options.
had Harmer, founder and chief information officer at Harmer Wealth Management, says constructing a well-diversified investment portfolio is a key way to mitigate risk and protect yourself from the negative impacts of market volatility.
"As an investment manager, I achieve this by choosing investments with low correlation to one another," Harmer says.
For example, instead of investing entirely in stocks, Harmer uses different investment classes, such as stocks, bonds, real estate and private equity funds. In addition, he invests in different market sectors and different geographical regions around the world.
"Given the recent market volatility experienced as a result of tariffs and war, proper portfolio diversification as a way to balance risk and reward is more important than ever," Harmer says.
Look for Bargains in the Market
Periods of market volatility can provide excellent opportunities to buy high-quality stocks at a discount. In early 2016, a period of market volatility related to concerns about China's economy drove Amazon.com Inc. (AMZN) stock from $696 down to $474. Investors who didn't panic and took advantage of the buying opportunity watched the stock quadruple to above $2,000 over the next three years.
To prepare for a potential volatile drop in stock prices, put together a watch list of high-quality stocks you would consider buying if their share prices dropped 10% or more from current levels. By preparing this watch list before a market sell-off occurs, you will avoid having to scramble to find potential stocks to buy in real time in a highly emotional state when you may not make the most rational decisions.
Don't Worry About Daily Swings
If the daily swings in the stock market seem too chaotic and random to predict, remember that there's no reason to even subject yourself to daily market headlines. Assuming you have a long-term investment horizon of at least five years, chances are the current volatility will pass in a couple of weeks, months or, in a worse-case scenario, a couple of years.
David Materazzi, CEO of Galileo FX, says daily market fluctuations are simply noise that reflect investor sentiment, not economics.
"If you own a good business at a sensible price, its long-term value doesn't change because someone else feels nervous today," Materazzi says.
"I've never based a decision on what the market did that day, and I wouldn't know how to make money if I tried."
Keep Things in Perspective
Market pullbacks, corrections and even bear markets are a normal part of the stock market cycle. According to American Century Investments, since 1949, the S&P 500 has experienced 29 market corrections of between 10% and 20%. During these corrections, the average time the S&P 500 took to recover to its previous highs was only about four months.
Larry Maddox, president at Horizon Wealth Advisors, says long-term investors shouldn't let emotions tied to market volatility derail their plans.
"Investors with a diversified portfolio and a long-term investment horizon should stick with their investment strategy," Maddox says.
He recommends investors remember the famous insight of Sir John Templeton: "The four most dangerous words in investing are: 'This time it's different.'"
Maddox says patience and historical perspective are critical for successful investing.
"Markets have always bounced back from temporary declines, sooner or later," he says.
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