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We’ve a saying at The Motley Fool Canada that our co-founder and Chief Rule Breaker David Gardner came up with. It goes something like:
“Stocks go down faster than they go up, but they go up more than they go down.”
Well, we sure did live this one out this week.
With the epicenter of the “action” landing among the companies that have gone up the most over the past year or two.
Anything that has a whiff of “AI” associated with it showed up in varying shades of red Thursday. On both sides of the border.
Fact is though, as painful as Thursday was, my fellow analysts at The Motley Fool Canada and I have been saying for months that the only thing that was holding the U.S. market (especially) within a stone’s throw of its all-time highs has been these same companies.
It’s been AI-or-nothing for the better part of 2026.
And while these AI-related companies have been taking it on the chin this week, you doesn’t have to look very hard to cobble together a collection of non-AI companies that have experienced similar treatment for much of the past year. High-quality companies at that.
The technical term for this dynamic is “narrow market breadth,” and we’ve been living it for some time.
And it hadn’t been a real issue. Until Thursday.
We Fools do our best to explain the importance of owning a diversified portfolio — something that I have certainly implemented in my own personal portfolios.
We also do our best to make clear that no one should have a single dollar invested in the stock market that could foreseeably be needed in real life within the next five years.
Guess what? This week, those bits of advice meant squat for account balances. For me, and probably most of you reading this.
Thing is, a day like Thursday, regardless of what it’s (temporarily) done to the value of one’s portfolio, serves a purpose.
After all, investing is journey. And no journey is without its fair share of hiccups.
One of the takeaways from a day like this is that it provides us with a real-time opportunity to discover our personal risk tolerance. Pulling on that string a bit further, it provides an indication of how well aligned our portfolios are for said tolerance.
Ideally, our portfolios well reflect our personal tolerance for risk.
If you’re treating this week like water off a duck’s back, congratulations. You’re probably well aligned.
But if the recent market action is going to lead you to sleepless nights, take advantage of this signal. Make some hard decisions and align your investments your appetite for risk.
Own more portfolio stabilizers (Stock Advisor Canada has offered plenty of recommendations along these lines). Extend your time horizon. And be extra sure not a dollar of your hard-earned savings that you might need within the next five years is invested.
Because there are more days like Thursday out there. Always have been. Always will be.
And it’s far better to let them serve you than it is to spiral into a regrettable cycle that knocks you off your investing journey.
Remember: “Stocks go down faster than they go up, but they go up WAY more than they go down.”
Fool on!
Iain Butler
Chief investment officer
The Motley Fool Canada
