I have spent decades working within the financial industry and have learned some extremely valuable lessons, chief of which is, Risk is generally misunderstood. For example, diversifying an equities portfolio does not hedge against Market Risk, but it does hedge against Sector Risk. When the market collapsed in 2008-9, diversified portfolios declined between 35% and 50% leaving many investors stunned. So what kept investors in the market during the worst of times? Did "staying the course" work out for all investors?
FOMO (Fear Of Missing Out) Investing is but one reason investors took on and maintained substantial risk during the recent financial crises and deflated bubbles. The equities markets have proven to have an upward bias over the very long -term averaging, arithmetically, 8%-11%/year with an overall 7-9% internal rate rate of return (IRR). Logically then, staying the course through market crashes should still assure long term growth over time. Staying the course goes with the old canard that missing the best 10 market days over 30 years would reduce returns to t-bill levels. You can't time the markets as they say. FOMO!
Mathematically, missing the 10 best market days does reduce returns, but missing the 10 worst days also raises returns to over 20%. Miss half of each and portfolio returns still approximate or exceed market returns. Arguably, the risks of staying the course are greater than the risks of reduced market exposure during high risk market cycles.
For investors requiring regular distributions out of their equity portfolios such as trust beneficiaries, retirees, and supported ex-spouses, staying the course proved problematic as those investors were mystified why the market recovered but their portfolio did not. Worse, portfolio depletion occurred even during the market recovery making planned for distributions unsustainable.
The question I have asked over the past quarter century is this, "Is there ever a time when the risks in the market are too great for small investors?" Based upon history, not one of the major brokerages or financial planning firms ever advised investors to exit the market, not that one would expect that to happen; imagine the catastrophic impact of broad advice to "sell" on the equity markets and financial industry.
My suggestion is, based upon years of litigation experience, when your lifestyle depends on regular distributions from an equities portfolio, cut your losses and reduce withdrawals immediately if you want to preserve principal, otherwise you will cannibalize your assets beyond recovery. Plan ahead to pare expenses and re-calibrate your expectations and expenses annually.