When the market drops 20%, two things happen simultaneously. Most investors feel the same fear. Wealthy families with well-structured portfolios and strong advisory relationships tend to do something very different with that fear than everyone else.
The difference isn't temperament. It isn't that affluent families somehow care less about losing money. It's that they tend to have structures, relationships, and frameworks in place that make the right behavior in a downturn easier — and the wrong behavior less likely. Here's what that actually looks like.
They Already Know Where Their Income Is Coming From
The single most destabilizing thing about a market decline for a retiree is most often the feeling that the income needed to pay bills is suddenly at risk. If the portfolio is the only source of liquidity and it's falling, the pressure to sell something — anything — becomes intense.
Wealthy families who navigate downturns well have typically already solved this problem before it arrives. One to two years of spending needs in cash or near-cash equivalents. A layer of short-duration bonds. A clear plan for which accounts fund near-term spending and which are left alone. When the equity portion of the portfolio falls, those families know exactly where their income is coming from — and it isn't from selling stocks at the bottom. For a look at how that income structure works in practice, this piece on how retirees create income without constantly selling covers the mechanics in depth.
They Use the Decline as a Tax Opportunity
This is one of the most consistent behavioral differences between affluent families with strong advisory relationships and everyone else. When the market falls, most investors are focused entirely on the loss. Their advisors are simultaneously scanning for tax-loss harvesting opportunities — positions sitting at a loss that can be sold, the losses realized for tax purposes, and the proceeds reinvested in a similar holding to maintain market exposure.
For a family with a $3M–$5M taxable portfolio, a significant market decline can generate six figures in harvestable losses that carry forward to offset future capital gains. That's a tangible financial benefit from a painful event — but only if someone is actively managing the portfolio with that objective during the decline, not waiting until it's over. For a clear explanation of how this strategy works, this overview of tax-loss harvesting covers the mechanics without the jargon.
They Rebalance Toward Equities, Not Away From Them
A disciplined rebalancing process does something counterintuitive during a bear market: it requires buying more of what's falling. When a 60/40 portfolio drops to 50/50 because equities have declined, rebalancing back to target means purchasing equities at lower prices — which is mathematically correct and emotionally very difficult for most investors.
Wealthy families with clear investment policy statements and advisors who enforce the rebalancing discipline tend to come out of bear markets in a stronger relative position than those who abandon their allocation under pressure. The benefit isn't just the return — it's the discipline of buying low rather than panic-selling into a decline, which is the behavior that can permanently impair long-term wealth.
They Don't Make Permanent Decisions Based on Temporary Conditions
The most expensive bear market mistakes tend to be permanent: moving to cash at or near the bottom and then waiting too long to reinvest, missing the recovery that historically follows. Concentrating into "safe" assets — short-term bonds, money market funds, gold — that don't participate when equities bounce back sharply. Making major allocation changes based on where markets are today rather than where the plan says they should be.
These decisions feel prudent in the moment. They feel like responsible risk management. What the data consistently shows is that they tend to produce outcomes significantly worse than simply staying the course — not because staying the course is comfortable, but because the recovery is often faster and sharper than the fear suggests it will be. For a historical perspective on what staying invested through a downturn has actually meant, this look at what happened the last time markets hit all-time highs before a recession provides useful context.
They Have the Conversation Before the Decline, Not During It
Perhaps the most important thing affluent families do differently is that they've already talked through bear market scenarios with their advisor before one arrives. What does a 30% decline mean for income? What triggers a rebalance? What would cause us to change the plan versus what's just noise? Having those conversations when markets are calm — and having them documented in a written investment policy — removes at least some of the emotional friction when the moment actually comes.
Advisors who initiate these conversations proactively — who call clients during a downturn with a clear update and a calm perspective rather than waiting to be called — tend to produce better behavioral outcomes than those who don't. That's not a soft benefit. It often shows up directly in long-term returns. For a broader look at the behavioral and structural risks that tend to surprise retirees most, this piece on protecting retirement from unexpected risks covers both dimensions.
What This Comes Down To
Wealthy families don't navigate bear markets better because they're smarter or more emotionally resilient. They typically navigate them better because they've built structures that make the right behavior easier — income that doesn't depend on selling equities, tax strategies that turn losses into future savings, rebalancing disciplines that enforce buying low, and advisory relationships that provide perspective when perspective is hard to find on your own.
If you want to work to ensure your portfolio is built to hold up the next time markets test it, we'd welcome the conversation. The best time to prepare for a bear market is before one arrives.
Bear markets test portfolios. More than that, they test the structure behind them. We work with affluent families throughout the St. Louis area to build the kind of coordinated investment, income, and tax structure that holds up when markets don't.
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John Wahl is a CFP® and ChFC®, co-founder of One Bridge Wealth Management, and was named to the Forbes 2025 Best-In-State Next-Gen Wealth Advisors list. One Bridge is a fee-based independent wealth advisory practice serving high-net-worth families in the St. Louis area. One Bridge Wealth Management acts as a fiduciary when managing assets.
2025 Forbes Top Next-Gen Wealth Advisors, created by SHOOK Research. Presented in Aug 2025; based on 03/31/25 data. Advisors pay a fee to hold out marketing materials. Not indicative of advisor's future performance. Your experience may vary.
This content is for informational purposes only and does not constitute personalized tax or investment advice. Please consult a qualified tax professional regarding your specific situation.