Beyond the basics, a smart investor can employ a variety of strategies to cope with adverse market conditions. Give some of these strategies a try:
Pay down debt. The return on investment by paying off a loan is equal to the interest rate charged — but unlike other investments, the return is guaranteed. Even paying down a mortgage (often considered good debt) may be the best investment you can make in a down market.
Invest for total return (the combination of growth and income), not just income. Down markets often coincide with sluggish economic conditions. Income investors feel the squeeze when rates on CDs and other income investments drift lower and lower. Invest for the highest total return consistent with your risk tolerance and then take distributions as needed.
Continue to invest the same amount of money on a consistent basis, be it weekly, monthly, or quarterly. By sticking with the program in good times and bad, and increasing the amounts of your contributions when you can, you can build wealth regardless of market conditions.
Automate your savings program. Participants in 401(k) plans enjoy both automatic investing and dollar-cost averaging, but most financial institutions will arrange similar systematic investing in other types of accounts.
Use target maturity and life-cycle funds. These funds-of-funds provide a complete portfolio rebalanced automatically, ensuring broad diversification and effortless investing.