Strategies for Investing in Uncertain Markets | Capital Group

Market Fluctuations

Strategies for Investing in Uncertain Markets

In an uncertain market, one thing is certain: Market declines are an inevitable part of investing.

These 5 investment strategies can help you ride out the bumps and keep your eyes on the big picture.

  1. Stay Calm and Get Professional Advice

    • Avoid making quick moves on your own, as tempting as it may be. Instead, meet with your financial professional and share your concerns.
    • Resist making decisions on the basis of single events.
    • Re-examine your investment goals, time horizon and risk tolerance with your financial professional to make sure they remain appropriate.
  2. Maintain a Diversified Investment Portfolio

    • Work with your financial professional to spread your risks.
    • Consider selecting a mix of mutual funds that invests in stocks and bonds. Additionally, keeping an appropriate amount of your portfolio in money market or cash equivalent mutual funds and other liquid investments can help you meet short-term needs.

    • Include funds that invest outside the United States. Non-U.S. markets often move in their own market cycles.
    • Diversification doesn’t guarantee a profit, but over time it can help to reduce the effects of volatility.
    Maintain a Diversified Investment Portfolio
  3. Invest Regularly — In Good and Bad Times

    • Avoid moving everything into stocks at the hint of good news — or everything into cash following bad news.
    • Instead of fearing a down market, view it as an opportunity to buy shares at potentially lower prices.
    • Consider investing a fixed amount every month or quarter, a strategy known as dollar cost averaging. You won’t have to guess which way the market is going. You also won't risk the possibility of investing all of your money at the top of the market. (Please note that this strategy of regular investing does not ensure a profit or protect against loss.)
    Invest Regularly — In Good and Bad Times
    Invest Regularly — In Good and Bad Times
  4. Invest for Income

    • Consider mutual funds that stress the role of dividends — or bond funds that produce a steady stream of interest payments.
    • Income-producing investments can provide a cushion during a down stock market. After all, a dividend is yours whether the stock price is rising or falling.

    Invest for Income
  5. Avoid Jumping In and Out of the Market

    • Successful market timing during a bear market is extremely difficult because it requires two near-perfect actions: getting out at the right time and getting back in at the right time. As a result, investors typically end up buying high and selling low.
    • One reason it’s difficult: A bear market is not usually characterized by a straight-line decline in stock prices. Instead, it tends to be jagged — showing bursts of stock price increases and then declines that bring with them corresponding feelings of euphoria and concern.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Regular investing does not ensure a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining.