Markets and economy

The patient investor and the turbulent markets

Commentary by
4 minute read
February 23, 2022
Markets and economy
Market volatility
Vanguard news
Vanguard values

You’re a patient investor. You understand that the rewards for your diligence are won over time. You’re willing to give up potential extra return because you know the importance of balance—having bonds in your portfolio because they help absorb the blow when stock markets get rocky. You’re in it for the long run.

So, what do you do when the markets seem to turn against you? I wrote just four weeks ago about equity markets that had fluctuated wildly even in the course of a single trading day. I wrote then about the several reasons to expect more volatility ahead.

What do you do when those days of markets falling and then rising give way to markets falling and then falling some more? You’re the same investor, with the same goals and the same long-term view. You haven’t changed, but have the markets? You fear they’ll keep changing, and not for the better. And they may—but not forever.

Why we look to the long term

A new dimension of risk has entered the financial markets with heightened tensions in Ukraine. It’s not something the markets needed when they were already dealing with brisk inflation and preparing for an expected cycle of interest rate hikes from most of the world’s central banks.

We know this, however, about equity markets in the context of geopolitical risks: they’ve been resilient, much as markets have always been resilient in the face of various risks. We expect the markets to work themselves out, reaching new heights over time and at varying paces. These rises will sometimes be punctuated by sharp declines. This is how it works.

So now is not the time to give up your fortitude. Now is the time to take it all in with a deep breath, knowing that this day would come—and knowing that it will pass. I wish I could tell you when it will pass. That, unfortunately, is not how it works.

In the meantime, if the markets throw your mix of stocks and bonds out of kilter, you may have a good opportunity to restore them to your desired state. Rebalancing is a useful strategy for ensuring that your asset allocation continues to suit your goals.

Two good reads from Vanguard

Vanguard’s global economics and markets team recently gave context to the economic challenges ahead with the Vanguard Economic and Market Outlook for 2022: Striking a Better Balance. It’s a captivating global story about the delicate relationship between economic stimulus and economic self-sufficiency.

For another good read, try Vanguard’s Principles for Investing Success. It’s an enduring story about maintaining perspective, tuning out the day-to-day noise that can lead to regrettable decisions, being true to your goals, and embracing the power of the long term. It’s a story about 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.
How SECURE 2.0 reforms affect retirement plans
An omnibus bill signed into law on December 29, 2022, has wide-ranging impact on retirement plans and participants.
Our 2023 economic and market outlook and you
Ryan C. Murray, a Vanguard senior financial advisor, shares his thoughts on how inflation and recession expectations and developments in fixed income and equity markets could affect your portfolio.
Introducing the Vanguard Multi-Sector Income Bond Fund
Learn how our new multi-sector bond fund can be used to complement a core fixed income position in your portfolio.
Vanguard economic and market outlook for 2023: Beating back inflation
Our base case for 2023 includes a global recession brought about by policymakers’ efforts to control inflation.
Who owns Vanguard?
Who owns Vanguard? Learn more about the only investment management company owned by investors—and how this distinction keeps us consistently focused on investor needs first.

All investing is subject to risk, including the possible loss of the money you invest.

Investments in bonds are subject to interest rate, credit, and inflation risk.

Rebalancing does not ensure a profit or protect against a loss.