If you're an investor worried that another downturn could rock the markets before the year is out, you're certainly not alone. Investors have been met with no shortage of bold and eye-catching predictions from Wall Street for months on end that another crash could be just around the corner.
Whether or not the harbingers of doom are right isn't really the point here. Market downturns come and go. What matters is not an investor's ability to accurately predict a market crash -- and many have tried and failed to do so -- but to respond correctly when they do appear.
A long-term buy-and-hold investing strategy doesn't become obsolete just because the market experiences a short-term downward spiral. In fact, sticking to this tried-and-true strategy of consistently investing in a variety of quality companies across multiple industries and holding onto them through the ups and downs in the market becomes more important than ever during these volatile moments.
In any market environment, habitual and consistent investing is the retail investor's advantage. If you attempt to time the market or guess what it will do next as a means of determining your investment decisions during a downturn, you will likely be sorely disappointed with the results.
Not all stocks or portfolios respond to downturns in the same way. The composition of your portfolio will depend on your personal risk tolerance and investment preferences, but a balanced approach to diversification can help minimize the impact of a crash on your holdings.
For example, if you're an investor that has bought heavily into historically high-growth stocks like Amazon, Etsy, or Shopify, your portfolio has likely been struck with far more volatility in the choppy market of the past year than someone who tends toward slower-growth, value-oriented stocks or blue chip stocks.
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