For investors accustomed to strong and consistent stock market gains, a period of sustained falling stock prices is not easy to deal with. All too often, investors will react to a drop in prices by panic selling or digging in their heels despite deteriorating fundamentals. But more thoughtful investors will see a correction or downturn as an opportunity to review the risks in their portfolios and make adjustments where necessary.
Ways to reduce market risk include asset allocation, diversification, and focusing on less volatile stocks.
Perhaps most important to keep in mind during a market downturn is a long-term perspective. Periods of falling prices are inevitable and a natural part of investing in the stock market.1
1Past performance does not guarantee future results.