Down Markets: A Prudent Approach and Survival Guide for Non-Retirees

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Down Markets, pullbacks, corrections, and even full-fledged bear markets are part and parcel of the investing journey. They’re uncomfortable—sometimes downright scary—but they are not unusual. In fact, since 1977, The Prudent Speculator has seen 39 corrections of 10% or more for the S&P 500. Every one of them was followed by a recovery, with the average rebound exceeding 40%.

For those not yet retired, down markets aren’t just survivable—they can be incredibly valuable.

Here are steps we encourage you to take, helping you to come out stronger on the other side.

1. Down Markets Offer a Long-Term Gift

While losses on paper can sting, non-retirees have something retirees do not: time. If you’re still in accumulation mode, every contribution made during a downturn buys more shares at lower prices. This “buying the dip” happens automatically if you invest consistently.

2. Keep Your Strategy, Not Your Stress, Front and Center

Emotional decisions rarely serve investors well. Selling after a decline locks in losses and risks missing the rebound. Historically, markets have bounced back sharply—and unpredictably—after major drops. Staying the course has rewarded those with patience and discipline.

3. Focus on Asset Allocation, Not Account Balances

Instead of watching portfolio values swing, check whether your asset mix still aligns with your risk tolerance. If stocks have fallen, you may now be underweight. Rebalancing—buying more of what’s fallen—can position you for long-term recovery.

4. Don’t Underestimate the Power of Dividends

While prices fluctuate, dividends continue to be paid. Reinvested dividends during market troughs can enhance returns. Value stocks, in particular, often offer above-average dividend yields—and many companies have long records of maintaining or growing payouts.

5. Reinforce Your Foundation

An emergency fund and manageable debt are your best defense against needing to sell investments in a downturn. Secure those basics, and you give your portfolio the time it needs to recover.

Our Take

Markets will fall again…and again after that. That’s not a flaw—it’s a feature. Volatility is the price investors pay for the chance at long-term growth. But we think those who stay invested, focus on undervalued, dividend-paying stocks and maintain a prudent, patient mindset, are positioned to come out ahead.

For more than 47 years, we have collaborated with our clients in their investment decision making process as they pursue their long-term financial goals. We are committed to keeping your goals, concerns and attitude about investing at the heart of your plan.

If you’re considering a large purchase but want additional guidance and ready to experience our personalized investment approach and exceptional client service, contact Jason R. Clark, CFA at 949.424.1013 or jclark@kovitz.com.

Kovitz Investment Group Partners, LLC (“Kovitz”) is an investment adviser registered with the Securities and Exchange Commission. This report should only be considered as a tool in any investment decision and should not be used by itself to make investment decisions. Opinions expressed are only our current opinions or our opinions on the posting date. Any graphs, data, or information in this publication are considered reliably sourced, but no representation is made that it is accurate or complete and should not be relied upon as such. This information is subject to change without notice at any time, based on market and other conditions. Past performance is not indicative of future results, which may vary.