It's only natural to feel a bit anxious when stock markets start to fall.

As prices keep sliding, research into behavioral finance suggests that many investors tend to project those losses forward. And if market turbulence intensifies, so can such emotional responses, especially when price fluctuations extend past one or two sessions. 

How often does that really happen, though? Taking a step back and looking over a longer timeframe, it becomes evident that investors shouldn't be surprised by multitudes of short-term periods in which prices temporarily drop. 

Let's consider an extended period of the Russell 3000 index's daily returns. It's an all-cap benchmark that tracks 98% of the U.S. stock market. Notice in the chart below, this 'total stock market index' generated positive returns in 17 out of 20 years (through 2021). 

Such positive results took place despite a daily roller coaster effect in stock prices. So how much fluctuation actually happened during these years? The chart's major highlights include:

• Intra-year declines for the index ranged from 3% to 49%. 

• Calendar-year returns improved on those spurts in volatility as the steepest declines saw notable recoveries.

• During the financial crisis in 2009, an intra-year drop of 27% was a head fake to traders as stocks wound up gaining 28% at year's end. 

The takeaway here is clear: Volatility shouldn't be considered as an anomaly. Still, it's only natural to become uneasy — even worried — about your long-term financial security during bouts of extreme market volatility. While such emotions can't be totally ignored, focusing on facts and self-education can go a long way towards developing a lasting and rational investment strategy. 

Sorting through all of the historical data is one challenge. Putting such information into a practical perspective to help construct a well-thought out portfolio strategy is another. 

Along these lines, we recommend that investors check out IFA's Risk Capacity Survey. It's designed to measure how much portfolio risk is appropriate in an investor's portfolio at any given time. The RCS is available onliine to everyone, whether you're a novice at investing or more experienced at dealing with portfolio asset-allocation issues. 

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