When markets fall

Drops are part of the deal

Declines of 10% or more (called corrections) have happened every year or two on average. Drops of 20% or more (bear markets) have come every several years. So far, the US stock market has eventually recovered from every one, though some recoveries took years.

Nobody has reliably predicted these drops or the rebounds. Some of the market's best days have come right after its worst, so investors who sell and wait on the sidelines often miss them.

Dollar-cost averaging

Dollar-cost averaging means investing a fixed amount on a regular schedule, like $100 every payday, no matter what prices are doing. When prices are low, your $100 buys more shares. When they're high, it buys fewer.

If you already have a lump sum, research suggests investing it right away has usually come out ahead, because markets rise more often than they fall. Spreading it out can still be reasonable if it helps you sleep and stick to the plan.

Your downturn plan

1. Keep your emergency fund in cash, so you never have to sell investments to cover bills.
2. Keep automatic investments running.
3. Check your mix still matches your goals, rather than reacting to headlines.
4. Look at your account less often. Daily checking makes normal swings feel scarier.