This summer, my kids and I joined my extended family for our annual pilgrimage to Santa Claus, Indiana – home of the amusement park Holiday World – for a 3 day theme park extravaganza. 

(For those of you looking for an amusement park review, you’re in luck.) Holiday World wins hearts due to its unique holiday-themed lands, world-class roller coasters, and the value-packed amenities like free drinks, parking, and even sunscreen. And it doesn’t get any more value-oriented than when your parents pick up the tab. Thanks, Mom and Dad. 

On day one, my eight-year-old son begged me to ride The Voyage – a 1.2-mile wooden beast, ironically in the Thanksgiving section of the park, that hits 67 mph and once earned the title of America’s top coaster.

As I get older, I’ve realized my body just doesn’t handle rollercoasters like it used to. Despite this awareness, I brushed it aside in an attempt to preserve my “cool dad” image in my son’s mind. 

After a slow climb to start the ride, the rollercoaster plunges half a football field straight down at highway speeds. It didn’t get any better after that, tossing us around like a sock in a dryer.  When we finally rolled back into the station, I had survived – but barely.

My neck was stiff and my stomach was in my throat  BUT my “cool dad” reputation was still in tact – at least in my mind. 

By the next morning, I had the range of motion in my neck of a garden gnome. So when my son asked if I wanted to ride The Voyage again, I surrendered the cool-dad card entirely and said, “Not a chance.” I stuck to the tamer (read lamer) rides – but honestly, more than free soft drinks or sunscreen what I wanted most was my chiropractor.

The Stock Market’s Roller Coaster Ride

The market wrapped up last week with a feel-good ending: the 43 day U.S. government shutdown finally coming to an end. Stocks finished Friday basically flat, suggesting worry about the shutdown was overstated, or its resolution was already priced into the market, or likely both. 

But before the calm came the drop.

On Thursday, stocks fell nearly 2% – and not because of the shutdown. The selloff was fueled by sharp declines in big tech and AI-related names with stretched valuations, plus fading confidence that the Federal Reserve will cut interest rates soon. Rate-cut hopes are a big reason valuations have been floating near the stratosphere.

Even so, the S&P 500 is up more than a third since its 10% two-day plunge back in April on Liberation Day (tariff implementation). The NASDAQ? Up more than 50%.¹ That’s a long rollercoaster ride up. Should investors be bracing for a sharp fall?

Riding the Investing Rollercoaster

As the graph below illustrates, investing long-term looks a lot like riding a roller coaster – long climbs, sudden drops, and plenty of moments where you question your life choices. 

Source: JP Morgan, Guide to the Markets

The stock market has historically returned around 10% per year. But those returns only materialize for people who stay buckled in. So the real question becomes:

How do you stay invested through the twists, dips, and loop-de-loops?

Choose The Right Roller Coaster

An all-stock portfolio can feel like The Voyage – thrilling on the way up, terrifying on the way down, and not for everyone. If you find yourself vowing “never again” every time markets tumble (raises hand with a stiff neck), then you’re probably not on the right ride.

Successful investing means choosing a roller coaster you can stay on day after day, year after year, without bailing at the first sign of turbulence. Because history has shown that steep drops are often followed by steep recoveries – and you only benefit if you’re in the seat, not standing on the platform watching the coaster roar by.

The Best Rollercoaster for Your Investing Success

The right portfolio is the one you can stick with – through booms, busts, shutdowns, and surprise 2% drops on random Thursdays.

As the old saying goes: Stocks are the gas. Bonds are the brakes.

Some investors prefer a smoother, gentler ride with plenty of brakes. Others want the adrenaline rush of the big swings that come with an equity-heavy portfolio. And just like my appetite for violent wooden roller coasters has waned with age, most investors naturally shift toward less volatility over time.

If you want to know which type of investing rollercoaster is right for you, completing a risk tolerance questionnaire can help. Another possibly more valuable tool is to reflect on how you responded during past market drops:

• In April, when stocks fell nearly 10% in two days
• In 2022, when markets ended the year down 20%
• In 2020, when COVID sent stocks down 33% in a month

Your behavior during past declines is the best predictor of how you’ll react to the next one.

The Time to Check Your Ride Is Before the Drop

The best time to buy an umbrella is when the sun is shining. And with markets near all-time highs and valuations looking lofty, now’s the perfect time to make sure you’re strapped into the right investing roller coaster.

Because the next big drop is coming someday – and you don’t want to be the investor standing on the sidelines with a stiff neck and a revoked cool-dad card.

Castle Quote: “You make most of your money in a bear market; you just don’t realize it at the time.” — Shelby Cullom Davis.

Source: 1 https://www.investing.com/indices/us-spx-500-historical-data