Some smart—and unconventional—things to do in a down market

3.5 minute read
January 06, 2022

As part of our series on market volatility, we’re taking a closer look at some ways to stay ahead of the game the next time a market pullback begins to dominate headlines.

Market downturns are out of your control

Markets move based on variables no one—not even an advisor—can control or predict. And when stock prices decline, the steady drumbeat of negative news reports can drive many people to flee the markets out of fear (and miss out on potential gains as financial markets regain their strength).

But when others are pessimistic, you can reframe the situation as an opportunity. Here are a few strategies that have historically helped investors succeed in weathering market lows.

Tune out the noise

It’s okay not to check your portfolio balance when the market is falling. Turning off the news might help you stress less—and keep you from acting impulsively based on emotion.

Revisit your asset allocation

We designed your plan to account for your risk tolerance. But if you feel like your risk tolerance has changed, together we can figure out the balance of stocks and bonds best suited to your comfort level with risk and other personal circumstances, and then adjust your plan accordingly. Remember, your plan already includes low-cost ETFs so you don’t have to worry about high costs eating away at your returns.

Set realistic expectations

U.S. stock and bond markets have posted remarkable returns in the past few decades. Statistically speaking, it would be prudent to expect lower returns in the future. By staying the course and sticking to your plan, you can still achieve your goals despite potential headwinds of lower returns.

Stay diversified

Downturns offer case studies in how different asset classes and sector exposures can help protect your portfolio. We’ve designed your portfolio to be diverse so it can handle exactly these types of situations. Diversification will offset the impact of future downturns and keep you on a steady track to reach your goals.

And keep in mind: When the markets are underperforming, your patience can reward you.

Most Viewed

Ready to invest? See how to open an account
Start with this step-by-step guide to opening a personal investment account, such as a general investing brokerage account or an IRA.
Perspective in a time of heightened volatility
Market woes continue, but history has shown that saying the course is usually the best route to success.
Investing in a high-inflation world
Vanguard CEO Tim Buckley shares his views on investing in a high-inflation world.
How to choose a college savings account
Why volatility and downturns are part of investing
Chief Economist Joe Davis explains why market volatility and downturns happen and why they’re part of investing.
Fueling the FIRE movement: Updating the 4% rule for early retirees
With updates based on Vanguard’s principles of investing success, the 4% rule can help FIRE investors achieve success in retirement.

All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss. 

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

While Vanguard Advisers, Inc. doesn't have advisors located in every state, we’re available to help you nationwide over the phone or virtually.

The services provided to clients who elect to receive ongoing advice will vary based upon the amount of assets in a portfolio. Please review Form CRS and the Vanguard Personal Advisor Services Brochure for important details about the service, including its asset-based service levels and fee breakpoints.