Investing Strategy
What to Do When Markets Drop 20%
A 20% decline feels urgent, but reactive decisions can permanently reduce long-term returns. A written downturn plan protects behavior and keeps strategy intact.
First steps in a drawdown
- Review goals and timeline before changing allocation.
- Confirm cash reserves are sufficient for near-term spending.
- Avoid checking portfolio values multiple times daily.
Constructive actions
- Rebalance toward target allocation if drift is large.
- Tax-loss harvest in taxable accounts when appropriate.
- Continue planned contributions when possible.
Practical move: Market downturns test process. A pre-defined plan is more valuable than a new prediction.
Downturn checklist
- Revisit written investment policy and risk limits.
- Evaluate liquidity runway for the next 12 months.
- Execute only planned actions, not emotional trades.
Track Net Worth Through Volatility