Gen Z scrambling as markets wobble: what young investors should do now

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Young investors are getting an abrupt lesson in market turbulence as the U.S. conflict with Iran sends stocks through sharp daily swings. That early exposure to volatility can shape risk tolerance and portfolio choices—making these moves especially consequential for people who haven’t yet weathered multiple market cycles.

Since the United States began military action on Feb. 28, markets have bounced between sizable daily losses and gains, according to data from Morningstar Direct. The rapid back-and-forth tested investors’ nerves: within the first month the S&P 500 fell by more than 7%, though it later recovered to roughly its pre-conflict level.

Why this matters now

Volatility tied to geopolitical events tends to be concentrated and abrupt. For newcomers to investing, those fast swings can feel existential, said Douglas Boneparth, a certified financial planner and founder of Bone Fide Wealth in New York. Without past experience of downturns and recoveries, people often don’t know how they will react when portfolios move against them.

Data paint the picture: Morningstar Direct recorded daily declines in the S&P 500 of more than 1.7% and daily rallies exceeding 2.5% during the period after Feb. 28. An initial $10,000 placed in the index at the start of the conflict would have fallen to roughly $9,260 by March 29, then climbed back to about $10,026 by the most recent close.

What young investors should expect

Financial planners say this kind of turbulence is typical over a working life. Cristina Guglielmetti, a CFP and president of Future Perfect Planning in Brooklyn, notes that investors can expect multiple severe downturns across a multi-decade horizon—historically, roughly a dozen to two dozen episodes large enough to qualify as bear markets.

To be precise, a bear market is commonly defined as a drop of 20% or more from recent highs; a correction is a decline of 10% or more. In recent weeks the Nasdaq and the Russell 2000 slipped into correction territory while the S&P 500 approached it, before bouncing back.

“It’s not a matter of if the market falls again, but when,” Guglielmetti said, emphasizing that time in the market is a major advantage for younger investors—if they can remain invested through the downturns.

Testing your risk tolerance

Short-term shocks reveal how comfortable an investor is with losses. Zach Teutsch, founder of Values Added Financial in Washington, D.C., said market gyrations can disproportionately affect people who began investing recently—many members of Gen Z have only just started building portfolios.

Charles Schwab research from 2024 found Gen Z began saving and investing at about age 19, on average, compared with baby boomers who started roughly in their mid-30s. That gap means younger investors have less lived experience of downturns and recoveries.

Practical steps to consider

Assess your emotional reaction. If recent movements made you want to sell, your current asset mix may be too aggressive.

Match investments to goals. Keep long-term retirement savings mostly in stocks; move money earmarked for a home or school within a few years into safer, liquid options.

Build a buffer. Holding some cash, short-term bonds, or a high-yield savings account can reduce pressure to sell during declines.

Prioritize a plan you can follow. The best strategy is one you will actually stick with over decades, not one that only looks optimal in hindsight.

Guglielmetti warned against swinging too far into either extreme: being overly conservative can leave investors short of their goals, while panicked selling during drops risks missing the rebound.

Putting short- and medium-term goals in different buckets

Boneparth recommends treating money differently depending on the timeline. Funds needed within a few years should not ride the same risk wave as retirement savings.

For example, a high-yield savings account or certificates of deposit may suit immediate needs, while a mix of cash and conservative fixed-income products can serve medium-term plans. Young investors can hold multiple portfolios simultaneously for different objectives rather than treating every dollar the same.

Ultimately, market turbulence linked to geopolitical events is unsettling but not unusual. The critical question for less experienced investors is whether their allocation suits both their time horizon and temperament—because staying invested through volatility is often as important as the returns themselves.