Investment Strategies for Volatile Markets | American Funds
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Market Fluctuations

Investment Strategies for Volatile Markets

In a volatile market, one thing is certain: Market declines are a relatively routine occurrence.

These five investment strategies can help you ride out the bumps and keep you focused on your long-term goals.

  1. Stay Calm and Get Professional Advice

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

    • Work with your financial professional to spread your risks.
    • Consider an investment strategy that includes a mix of mutual funds investing in both 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.
    • Over time, diversification can help to reduce the effects of volatility.
    Maintain a Diversified Investment Portfolio
  3. Invest Regularly — In Good and Bad Times

    • Consider investing a fixed amount in mutual funds at the beginning of every month or quarter, an investment strategy known as dollar cost averaging. You won't have to guess which way the market is going.
    • Instead of fearing a down market, view it as an opportunity to buy shares at potentially lower prices.
    • 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.
  4. Invest for Income

    • Consider mutual funds that stress the role of dividends — or bond funds that seek to produce a steady stream of interest payments.
    • An income-producing investment strategy can provide a cushion during a down market. After all, a dividend or interest payment is yours whether prices are rising or falling.

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

    • Don’t move everything into stocks at the hint of good news or everything into cash following bad news.
    • Successful market timing during volatile markets 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: Volatile markets tend to have 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. 

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