Beginning Feb. 19, 2020 and continuing for the next five weeks, the S&P 500 Index fell nearly 35% before hitting its low on March 23 at 2,237. Twelve months later, the index had rebounded 77%.

Those who had the fortitude to ride these market waves were handsomely rewarded, while those whose emotional reactions led them to exit the markets were severely disadvantaged.

Investors can learn three major lessons from these recent market movements:

Recognize fear: During times of high volatility and negative returns, fear can lead an investor to make the emotional decision to exit the market. To put this into context, let’s relive March 16, 2020, when the S&P 500 dropped 12%. On this same day, the market’s “fear gauge” as measured by the Cboe VIX volatility index closed at a record high. The uniqueness of the pandemic created much uncertainty: grocery shelves were pillaged, streets were empty and work from home orders were being instituted. Many investors feared how long this would last and how low the market might go. For those who exited the market based on fear and emotion, they were forced to sell low, the opposite of “sell high.”

Know your risk tolerance: During market upswings, investors tend to define themselves as highly risk tolerant. The real test comes at times of market drops, when those same investors often realize they are actually much less risk tolerant than originally thought. Establish your acceptable level of market risk for both the short- and long-term, then allocate your portfolio accordingly and stick with it. This will help you maintain a disciplined approach to your portfolio at times of market volatility. Also, regular portfolio rebalancing will help maintain your ideal allocation. If you rebalanced your portfolio on a quarterly basis, March of last year provided a tremendous opportunity to “buy low.”

Have a plan: Most investors focus on the near-term. Although markets can behave irrationally in the short-term, they eventually look ahead to business fundamentals and longer-term outcomes. This forward-looking approach anticipates the impact of such things as free cash flow generation, a high U.S. savings rate, pent-up consumer demand and strengthening balance sheets of corporate America. Markets do not move in a linear upward direction, but rather have up-and-down cycles. Recognizing that these cycles exist, and accounting for them in your long-term investment plan is key to attaining financial success for the long haul.

Learn from the lessons above if you’ve made mistakes during this most recent market cycle. Be sure you have established an investment plan that incorporates the appropriate risk tolerance for your short- and long- term goals, and follow a disciplined approach to avoid emotional buying and selling decisions. Keep focused on the big picture as opposed to the here-and-now.

Wendy Bennett is a senior financial adviser at Bennett Associates Wealth Management in Butler.