We live in a world where everything demands an immediate reaction. Social media is notorious for encouraging us to respond instantly to every event. Something crazy happens in sports, and we’re told to react immediately. Something crazy happens politically, and again, we’re told to react immediately. In fairness, there are times when an immediate reaction is perfectly fine. For example, it would be strange to watch a comedy show and not laugh at the jokes (unless they weren’t funny at all). But what happens when reacting isn’t the best course of action?
At first glance, “reaction” and “response” may seem interchangeable. But when we examine them more closely, the difference becomes clear—and it’s a difference that matters in the world of building wealth. A reaction is an action done instinctively after something occurs, typically driven by emotion. A response, on the other hand, is a deliberate action taken after reflection, typically driven by thought rather than impulse. Both reactions and responses occur after a triggering event, but the path to each—and the outcomes they produce—are very different. Since we have increasingly become a feeling-driven society, we have also become more reactionary. If we want to build long-term, durable wealth, we must learn to respond rather than react.
April 2025 was a clear example of this. At the beginning of the month, the stock market took a steep dive after President Trump’s tariff announcement. Between April 2nd and April 8th, the S&P 500® dropped 12%, and the more tech-heavy Nasdaq dropped 13%. Panic spread quickly. News outlets speculated about an impending recession. Pundits predicted a continued market crash. Fear was in the air. If an investor gave in to that fear, they likely would have pulled their money out of the market and moved to cash. That reaction would have felt good in the moment because everything looked bleak—and seemed likely to get worse. However, despite how necessary that decision may have felt at the time, it would have been the wrong one. Since April 8th, both the S&P 500® and the Nasdaq have rallied up 13.4% and 16.9%, respectively, as of May 5th. Reacting to the sell-off by retreating to cash would have meant missing out on a major rebound.
What would the outcome have been if you had responded instead of reacted? One of the oldest investment principles is simple: buy low, sell high. When the market is down, that’s an opportunity to invest. The long-term average return of the stock market is around 10%, meaning a short-term downturn rarely signals the end of the world. Instead, it often signals opportunity. Of course, it can feel scary to invest when markets are falling, especially when the news and social media are screaming that worse is coming. But if you had trusted the historical data and responded by investing, rather than reacted out of fear, you would have greatly benefited.
Feelings and emotions are part of what makes us human. But the ability to control those emotions—and not be ruled by them—is what makes us wise. Investing requires discipline: the discipline to respond thoughtfully rather than react impulsively.
We made it through a wild month, but it’s unlikely to be the last. Market volatility comes with the territory when investing. So, when things go crazy, resist the impulse to react. Choose to respond. Reacting might be fine when watching sports or movies—but when it comes to investing and wealth building, it can be disastrous.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
Past performance is not an indication or guarantee of future results.
The S&P 500® is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index