Advice from Vanguard: How do we invest in down market?

The concept of this article is “diversify and do not leave the market”. Since 1980, there have been 9 bear markets. In this period of time, dramatic market losses stinged, but after sharp bear markets, there have been even more dramatic, much longer recoveries time. From the article, average length of bull market was 852 days, while average length of bear market is 236 days.

Market timing is also futile: The best and worst trading days often happen close together and occur irrespective of the overall market performance for the year. Since 1980, there were only 20 best trading days and 20 worst trading days.

Predicting which segments of the markets will do well is also a tough order. It is very hard to choose the next year's best asset.

And riding out the rough periods can pay off. This charts shows you must keep remain in the market.

In this article, Vanguard suggests very basic, simple invest strategy: Tune out the noise, revisit your asset allocation, control what you can-costs, set realistic expectations, stay diversified.

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I understand that investing is exciting. You can make money, be rich, do what you want without thinking money. However, for me, I decided to become solid rich. I know it will take time, which may be took more than decade, but I’m sure this asset is too solid that windy or storm cannot destroy it.

 

I’m truly agree that controlling what we can-costs and staying diversified. I cannot expect which segments of the markets will outperform tomorrow. However, regardless of returns, I can buy the cheapest funds! Even return is worse, total return may outperform than others if my fund’s costs are cheap. Cost makes leaking your return. Choose one that low costs.

 

Additionally, I do not know where the best place is to invest tomorrow. Therefore, I diversified my assets—stocks, bonds, commodity. I’m investing the whole economy market. I do not worry about recession because I’m sure that we have a power to stand up again.

 

Resource: "Navigating a down market", Vanguard, March 14, 2022