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Possible Investment Strategies When the Market is Down

The stock market is notorious for its erratic swings, making it a challenging investment and a tumultuous journey for investors. These price fluctuations and market conditions can cause many investors to feel anxious and uncertain.

However, it is essential to approach investing with a calm and steady mindset, using common sense to make informed decisions. This approach is particularly true when the market is down, as emotions can run high and impulsive actions can lead to costly investment mistakes.

In this article, we will explore how to apply the principles of calm, steady, and common sense investing to navigate the challenges of investing in a down market and emerge with what we view as successful investment strategies.

While reading this article, please remember that no two markets are the same, and past performance is never an indicator of future results.

Stay Invested

It’s important to remember that investing is a long-term endeavor. Staying invested during market downturns can help avoid selling at the bottom of the market.

Historically markets go through cycles of ups and downs, and history shows that the market tends to recover over time. The market’s cyclical nature implies that selling your investments during a downturn can result in missing out on future gains when the market bounces back.


Diversification can help reduce risk in a portfolio. In the bull market that precedes the down market, some investors have concentrated positions in their portfolios that made money when the market rose.

However, these same investments in a down market can act as a weight dragging a portfolio lower. In a down market, and our view in every market, it may be important to spread their investments across different asset classes, such as stocks, bonds, and alternative investments.

While diversification does not eliminate negative returns in your portfolio, it may decrease volatility. Compared to having few asset classes, diversifying investments across various asset classes can potentially reduce losses during market downturns.

Consider Buying Low

While selling your investments during a market downturn can be tempting, it’s often the worst time to do so. Instead, consider taking advantage of the lower prices to buy investments with solid long-term potential. In this strategy, working with a financial advisor may be helpful. A financial advisor can assist in developing a plan to buy as prices fall.

Dollar-Cost Averaging

Historically, dollar-cost averaging can help take the guesswork out of investing when the markets are declining. Dollar-cost averaging is when an investor unemotionally invests a fixed amount of money regularly. For example, they could invest monthly and on a set date, regardless of market conditions.

This strategy may help take advantage of the market volatility. It allows investors to buy more shares when prices are low and fewer when prices are high.


In a down market, some asset classes may perform better than others. It would be best to rebalance portfolios periodically. This rebalancing may maintain an investor’s portfolio’s desired asset allocation and not unintentionally drift to an unwanted level of risk.

Consider Alternative Investments

Alternative investments, such as real estate, commodities, and long/short investment strategies, can offer diversification and returns not correlated to the stock or bond markets. When considering these options as part of an investment strategy, we believe working with a financial advisor would be helpful.

Be Aware of Yield and Safety

News headlines like recession, unemployment, or political and world events may sometimes lead investors to jettison their investments in the equity or bond markets. If the investor is nervous about the markets, the economy, or geopolitical risk, an FDIC-insured deposit account may be a good option.

It provides investors with what we consider a safe haven for their money. The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that provides insurance to depositors in case their bank fails. Working with a financial advisor to find a bank deposit program offering more than $250,000 of FDIC insurance and a competitive yield might be a consideration.

Understanding the Risk of Investing in a Down Market

When you invest in a down market, the value of investments may decrease, resulting in potential losses. This decline can happen because economic conditions or investor sentiment may cause stock prices to fall.

Furthermore, if an investor need to sell their investments during a down market to access funds, they may have to sell them at a lower price than they paid. This sale could result in a permanent loss of capital. Therefore, investing in a down market can be risky and may require a financial advisor’s guidance. A financial advisor can help investors carefully consider their strategy and coordinate their plan with their investment goals and risk tolerance.


Investing in a down market may be a worthy consideration. Assets historically are priced lower than their intrinsic value, offering a discount for investors. It is also an opportunity to buy stocks or other assets that may have been previously overpriced but are now available at a more reasonable price.

Additionally, investing during a market downturn can lead to higher returns when the market eventually recovers. Markets tend to cycle between growth and decline. However, it is important to remember that investing always carries risks, and working with a financial advisor to help you conduct thorough research before making any investment decisions is essential.


This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.

Past performance may not be indicative of future results.  No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

       Dunham & Associates Investment Counsel, Inc. is a Registered                 Investment Adviser and Broker/Dealer. Member FINRA / SIPC.   Advisory services and securities offered through Dunham & Associates                                               Investment Counsel, Inc.