Market crashes don't have to crush portfolios — UBS says staying calm, holding liquidity, and capitalizing on volatility can turn chaos into a wealth-building advantage.

UBS has urged investors to remain steady during recent market turbulence, offering three core rationales to support continued confidence despite escalating volatility.

Recent market turbulence has left many investors feeling uneasy. But according to UBS, a calm and collected approach during turbulent market cycles can be a huge wealth-building advantage.

In a recent note, the bank’s U.S. editorial team offered three core rationales for remaining steady during recent market turbulence.

The S&P 500 is currently in correction territory, and some strategists are now warning of a possible bear market. But according to UBS, investors have good reason to remain calm.

First, while painful, market sell-offs are generally temporary.

During bear markets since World War II, the S&P 500 fell an average of 32% from peak to trough, and it took an average of three years before reaching a new all-time high.

Those with diversified holdings saw smaller losses; a 60/40 stock-bond mix declined an average of 19%, recovering in approximately two years and three months.

Next, a liquidity strategy can help to prevent lasting losses during market downturns.

“With this financial cushion, we can maintain our lifestyle comfortably while we wait for markets to recover,” the firm said. “A well-funded liquidity strategy—holding enough cash, bonds, and borrowing capacity to cover spending needs for the next 3–5 years—is enough to fully insulate our day-to-day spending from market volatility.”

“This also helps us to avoid the risk of permanently locking in losses by tapping into the liquidity strategy instead of liquidating investments at ‘bear market prices.”

Finally, periods of volatility can be viewed as a chance to act strategically, such as by adjusting portfolio weights or engaging in tax-loss harvesting.

“Volatility tends to improve the risk/return profile of options strategies and structured investments, allowing you to potentially increase your portfolio’s yield and/or growth potential while maintaining protection against potential losses.”