A falling investment account balance is alarming, but it is usually normal market movement. This page covers how to tell what caused the drop, how past market declines have recovered, what an unrealized loss means inside a TFSA or RRSP, how fees show up in your balance, and the signs that something really is wrong. It is part of our investing basics guides.
This page makes much more sense when you view it beside average stock market returns, how the stock market works and how to buy stocks, and the dollar-cost averaging calculator. If the drop is making you question your whole plan, go back to how to start investing and best all-in-one ETFs in Canada before making a panic decision.
Quick diagnosis
| What you see | Likely cause | Action needed? |
|---|---|---|
| All holdings down similarly | Broad market decline (normal) | Usually no action required |
| One holding down significantly, others okay | Company-specific issue | Investigate the holding |
| Account down but you made a withdrawal | Your own activity | None |
| GIC shows a lower value than expected | How the institution values the GIC before maturity | Ask the institution; the amount invested is returned at the end of the term |
| Account was positive, now shows negative | Margin borrowing or a short position | Contact your broker immediately |
| Unknown transaction showing outflow | Unauthorized or mistaken transaction | Contact broker immediately |
Historical context: how past declines recovered
The figures below are for the S&P 500 price index (US dollars, dividends excluded), measured from the index’s closing peak to its closing low and then to the next record close.
| Decline event | Peak-to-trough decline | Time to a new record close |
|---|---|---|
| Dot-com decline 2000–2002 | 49.1% | About 7.2 years from the peak |
| 2008–09 financial crisis | 56.8% | About 4.1 years from the trough (5.5 years from the peak) |
| COVID crash (Feb–Mar 2020) | 33.9% | About 5.9 months from the peak |
| 2022 rate-rise bear market | 25.4% | About 2.0 years from the peak |
Each of these was followed by a new record high. Recoveries are not always this quick: after the 1929 crash, the S&P 500 did not close at a new record until about 25 years later. Dividends shorten the recovery for an investor who reinvests them, and a portfolio that differs from the index (more Canadian stocks, more bonds) recovers on its own timeline.
Unrealized vs. realized losses in registered accounts
| Account type | Effect of selling at a loss | Effect of withdrawing afterward | Tax consequence of the loss |
|---|---|---|---|
| TFSA | No change to contribution room | Only the amount withdrawn is added back to room, on January 1 of the next year | Cannot be claimed as a capital loss |
| RRSP | No change to contribution room | Withdrawal is taxable income; RRSP room is not restored | Cannot be claimed as a capital loss |
| Non-registered | Loss is realized | No contribution room involved | Capital loss can offset capital gains |
In a TFSA: Selling inside the account does not affect your room; withdrawing does. If you invested $10,000, the holding fell to $6,000, and you then withdrew the $6,000, only $6,000 is added back to your room the next January. The $4,000 decline is never restored as room. If you sell but leave the cash in the TFSA, your room is unchanged, and the account can still recover if you reinvest.
What volatility-tolerant looks like in practice
If your portfolio dropped 20% and you have 20+ years to retirement:
- You are experiencing a completely expected event
- A common response is to continue your regular contributions
- Dollar-cost averaging means your new contributions buy more units at lower prices
- Broad indexes such as the S&P 500 have so far regained every past peak, though some recoveries took years
If your portfolio dropped 20% and you retire in 3 years:
- This warrants a conversation with a financial planner
- Some investors shift gradually toward GICs and bonds as retirement nears
- CPP and OAS income forms a non-market floor: factor it into your income picture
Management fees and how they affect your balance
Sometimes an account balance drop is not a market move at all: it is a fee:
| Fee type | When deducted | Where you see it |
|---|---|---|
| Annual account fee | On the institution’s schedule | Transaction line in account history |
| ETF MER (management expense ratio) | Paid by the fund, calculated on its daily net asset value | Reflected in the unit price, not shown separately |
| Robo-advisor management fee | On the provider’s schedule | Transaction history |
| Trading commissions | On each trade | Transaction history |
| Currency conversion | On USD buy/sell | Bid-ask spread and/or explicit fee |
ETF MERs are the one fee that never shows as a separate transaction: they are paid out of the fund and slightly reduce its net asset value. A 0.20% MER on a $100,000 portfolio costs approximately $200/year, appearing as very slightly slower NAV growth rather than any visible charge.
What NOT to do when your account is down
| Temptation | Why it backfires |
|---|---|
| Sell everything and wait in cash | Locks in the loss; rebounds can be fast (the S&P 500 regained its 2020 peak within about 6 months) and are hard to time |
| Move to GICs “until things improve” | A recovery can come before the GIC matures, so you may sell low and buy back higher |
| Check your account multiple times daily | Increases anxiety without changing outcomes |
| Compare to pre-drop peak | Peak-to-current comparison amplifies emotional pain; focus on long-term returns |
| Stop contributing | Reduces the number of cheaper units you buy during the decline |
When to actually be concerned
Market declines during accumulation are normal and expected. These situations warrant professional review:
- Your portfolio is concentrated in a single stock or sector (not a diversified ETF) and the company-specific news is concerning
- You are within 3 years of retirement and your sequence of returns risk is high
- The drop revealed your true risk tolerance (you cannot sleep at night), meaning your allocation was wrong from the start
- You have ongoing automatic rebalancing that is buying into a falling asset class beyond your comfort level
For many Canadians holding a one-fund or two-fund ETF portfolio, a market decline does not change the plan, and regular contributions simply buy units at lower prices.
Related pages
Sources
The figures and rules on this page come from these sources. How we check facts.
- old.yardeni.com: Bull & Bear Markets