18 November 2018
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Julie Virta
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Vanguard Investors Share Advice For Weathering Market Volatility
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In my last blog post, I asked for comments, tips, and strategies for getting through market volatility—and I wasn’t disappointed. Thanks to everyone who shared a personal experience! 

We received a couple hundred comments. Some of them reinforced the importance of a long-term outlook, some recommended learning from the past, and some emphasized the power of remaining positive. But all of the comments confirmed my hunch: Vanguard investors are truly unique. 

As a whole, your responses reflected determination to reach a goal, humility to recognize mistakes, and resolve to get back on track. But I’d rather show you than tell you, so here’s a look at some of my favorite comments about weathering market volatility. 

Stay the course 

I quoted Robert Frost in my last blog post. Now I’d like to use a quote from an unknown source to summarize the sentiment of the comments below: “Don’t confuse your path with your destination. Just because it’s stormy now doesn’t mean you aren’t headed for sunshine.” 

In other words, keep a long-term perspective and stay disciplined. 

My wife and I … watched our investments take a nosedive on paper but just kept full steam ahead. —Roy G. 

You just have to bite the bullet and give the markets time to come back. If you sell, you are only locking in your losses. —Eric S. 

When the market swings and causes nerves to jump … I can look at annual, monthly, or weekly values. Weekly shows lots of changes and dips, but the annual view is much smoother … Most dips disappear. Using this real-world personal data shows the importance of a long-range outlook. —Jim C. 

Know yourself: Do what helps you sleep at night 

You know better than anyone what triggers your fight-or-flight response. If you have a history of making hasty changes to your portfolio when the market dips or rises, don’t look at your balance during periods of volatility. If willpower alone isn’t enough to keep you on course,consider partnering with an advisor. 

In either case, it’s important to adopt a mind-set or a lifestyle that allows you to live today and feel confident about how you’re preparing for the future—no matter what’s going on in the market. 

Take the sleep test: If market downturns keep you awake,you are taking too much risk. —Jo-Li S. 

Acknowledge your emotional state, and then just proceed living your life. Quit thinking that you should, or can, do something to “save”your investments. You can’t, and you assuredly won’t! —Susan H. 

I turn off conversation[s] about market volatility and risk. I have become a true couch potato investor. So far this strategy has worked well, and I plan to continue to use it. —Ronald S. 

I frequently think about my emotional response to market volatility for 2 reasons—to test my resolve to stick with an investment strategy and to prepare myself for the inevitable ups and downs. I believe that my investment strategy and behavior need to be aligned or neither will serve me well. —Scott D. 

Learn from the past (yours or someone else’s!) 

As investors, we expect market volatility—that’s a given.Human behavior is the wild card. But if you can follow certain time-tested investing principles—including setting goals, maintaining balance, controlling costs,and staying disciplined—you’re more likely to experience investment success in any market environment. 

Maybe you discovered the value of these principles the hard way, by testing the limits yourself. Maybe you heard about someone else’s experience with market-timing, making decisions based on emotion, or chasing performance. Either way, you can learn from the past and do the right thing during the next period of market volatility. 

The most valuable lesson I learned was never sell one motion or into a down market. That lesson was very expensive. NEVER again will I do any buy or sell without a clear reason and a clear place for the proceeds.—Rudy R.   

I remember my father talking about the market downturn in the early ‘70s, post-Watergate. … He pulled almost all his money out of the market. But years later he told me that what he learned is that he should have actually put MORE into the market and ignored the volatility. I didn’t know what he meant, exactly, until the market lows of 2009. And then I realized I was facing the same decision he faced: Panic and take my money out, or relax and realize this too shall pass. Fortunately, I learned from my father’s lesson and stayed fully invested. It was hard … but leaning on that history has proven the best guide. —Mark H. 

Back during the downturn in 2001, I was a rookie investor.I got upset, waited until the market regained its value, sold all my equities,and put the money in CDs. In 2008, after the large decline, I thought about 2001 and put as much as I could afford in [a stock fund]. … These days I just watch and wait. —Chris M. 

Stay balanced 

Different asset classes (stocks, bonds, and cash) react differently to market movement. Choose a mix of assets that can help you achieve your investing goals without exposing your portfolio to too much risk.I’d actually like to add my own comment to the mix here: Don’t wait until a market downturn to realize your current asset allocation is too risky. 

The downturn of ‘07–‘08 shows that … a good strategy for the average investor … is to focus on the long term, don’t overreact to market fluctuations, stay diversified, and re balance when necessary. —Les H. 

I maintain a 50/50 portfolio with the bond side containing 3 years of withdrawals in a stable value fund. …. I figure I will adjust my allocation when I hit 70. —Jim U. 

Always keep a balanced portfolio and re balance as you get closer to retirement, moving funds to more stable investments. —Doug 

… when stocks dropped in 2008, I re balanced twice by selling bond funds and using the proceeds to buy stock funds in order to keep my percentages the same. I’m very glad I did, because it meant I sold bonds when they were relatively high and bought stocks when they were very, very low.— Thomas L.  

Retirees: Keep a cash cushion 

All investing—even the original amount you invest—is subject to risk. But sometimes it’s smart to choose an asset allocation that exposes you to less risk, especially when you’re retired. 

Keeping some of your portfolio in cash (like in a money market fund) can temporarily shelter the money you use for daily living expenses from market volatility. This may save you the stress of having to take a withdrawal during a down market. It can also give your stock and bond investments a chance to rally after a market downturn. 

… since I am in retirement, I always keep 2–3 years of spending needs in a low-risk and liquid money market fund so that when the market gets squirrelly, I don’t care or react. This allows me to never have to sell low or buy high. —Anonymous 

I am now nearing retirement age … I asked myself, “What happens if another 2008 occurs just as I leave my job?” My answer is to have at least enough in cash [to] meet my minimal needs for a few years, so I won’t be in a position where I MUST sell stocks in the depths of a bear market. —Thomas L. 

I keep a cash reserve of 2 years’ estimated withdrawal needs. I figure that markets usually recover … after a sharp dip. —Alex S. 

See the glass half full 

There are advantages to being a long-term investor,especially in unpredictable market conditions. At worst, you expect market volatility and take it in stride. At best, you see down markets as an opportunity to buy investments that are likely to increase in value when market conditions improve. 

I try to remember that when the market goes down, stocks are really “on sale” and I buy more. It helps me find a way to make the best of a potentially negative downturn. —Eliza N. 

Market volatility in 2008 was the best thing that happened to me. I invested in stocks and index funds heavily, and it was the best time of my life. … Volatility gives a chance for buying good companies at reasonable valuations. —Karthi N. 

Many investors value their portfolio at its high-watermark, which heightens the sense of loss. Investors should take those opportunities of market drops to add to their holdings. There is never a “bad”time to make a good investment. —Don A. 

Years before the market downturn, I committed myself to a plan to never sell/always buy on market weakness. 2007/2008 tested that plans evenly when the market crashed. … I watched the value of my retirement funds plummet. I decided to stay with my plan, but it hurt! … those who didn’t sell staggered through it OK. It turned out to be the most uncomfortable, but probably the best, buying opportunity of my lifetime. —Malcolm M. 

Don’t lose your sense of humor 

Most of us have a lot to gain—and a lot to lose—when we invest. Money is more than currency. It represents freedom, security, and opportunity. 

Although the stakes are high when we invest our hard-earned money, it’s important to take market downturns in stride. The comments below made me smile. What they lack in serious advice they make up for in lighthearted wisdom—playfully reminding us that it’s futile to get weighed down by factors we can’t control. 

The superior returns of stocks come with risk. If you want a guarantee, buy a toaster. —Don A. 

When a downturn arrives, I follow the instructions printed in large friendly letters on the cover of The Hitchhiker’s Guide to the Galaxy: DON’T PANIC. —John S. 

I live in Alaska. The salmon return every year. So I clear my mind … and go fishing. Just like the salmon returning every year with increased numbers, so does the stock market. So go fishing and all will be well. —John K. 

After 40 years … volatility is like a good meal. A bit of flavor and spice makes a satisfying meal. —Carl H. 

Pepto-Bismol. Lots of Pepto-Bismol. —Doug M. 

Learn to live with volatility (and share your secrets for success) 

Market volatility is inevitable. But with the right asset allocation and mindset, you can do more than get through it—you can come out on the other side with more resilience, determination, and discipline than you had before. 

Investing is a personal endeavor, but you’re not alone in your journey. Share your tips, tricks, and experiences with others. As you’ve shown me once again, that’s what being part of an investing community is all about. 

Click here for the original blog article from Vanguard.   

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