Timing the market is futile, and dramatic selloffs are often followed by rebounds. Here are Vanguard's 4 insights on navigating turbulent markets.

Timing the market is futile, and dramatic selloffs are often followed by rebounds. Here are Vanguard's 4 insights on navigating turbulent markets.
In this photo illustration, the Vanguard Group logo is seen in the background of a silhouetted woman holding a mobile phone.Rafael Henrique/SOPA Images/LightRocket via Getty Images
  • Timing the market is futile, and dramatic selloffs are typically followed by recoveries, according to Vanguard.
  • In a recent note, the world's No. 2 asset manager detailed tips to help investors weather turbulent markets.

After a dismal 2022, global stocks have advanced so far this year on the prospect major central banks - especially, the Federal Reserve - are close to ending its interest-rate increases.

The benchmark S&P 500 index in the US has notched a gain of almost 8% in 2023, while the UK's FTSE 100 has climbed 4%. Still, the market outlook remains far from sanguine, given the still-unresolved banking turmoil in America and the mounting risks of an economic downturn. And with stock market predictions getting increasingly grim this quarter, investors are bound to be on edge.

Experts at Vanguard, the world's No. 2 money manager, shared their top tips in a recent note to guide investors through turbulent markets. Here are 5 insights from the firm on how best to navigate market volatility:

1. Bear markets and corrections are a part of life. Stay focused on the long term

A bear market is where asset prices see a prolonged decline - marked by a drop of more than 20% from the last peak. US equities suffered such a setback in 2020 when the fastest inflation in 40 years forced the Fed to embark on its most aggressive monetary-tightening campaign since the 1980s.

However, bear markets and periodic corrections are a part of the investing world and shouldn't unsettle investors who are focused on long-term returns, according the Vanguard. The S&P 500 has returned more than 150% in the past decade, despite several selloffs during the period.


2. Dramatic selloffs are typically followed by recoveries

While sharp market downturns can unnerve participants, staying invested is a good way to weather the storm and take advantage of the recoveries that typically follow such selloffs, Vanguard said.

The S&P 500 plunged 35% in the span of about a month in early 2020 as the coronavirus outbreak spooked global markets, in one of the sharpest selloffs in a long time. However, that was followed by an extended rally that started in March that year, and saw the gauge surge by almost 120% to a peak in January 2022.

3. Trying to time the market is pointless

"One reason investors shouldn't try to time the market is they run the risk of missing out on strong performance, which can seriously hamper long-term investment success," the investment management firm said in the note.

"Historically, the best and worst trading days have tended to cluster in brief time periods, often during periods of heightened market uncertainty and distress, making the prospect of successful market-timing improbable," it added.

4. Don't panic when the market is in turmoil

Investors who have moved to cash during episodes of turmoil have seen their portfolios underperform the markets, and staying out of the market for long periods "can make matters worse," Vanguard said.


Market participants should avoid overreacting to short-term downturns and stay on course to achieve longer-term investment goals, according to the money manager. For this, they should "tune out the noise", control costs, set realistic expectations and diversify investments, the firm added.