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Investing during times of market stress

By | May 16, 2023

In these times of market stress, investing can seem daunting; however, it is also in these moments where opportunities arise. Learning how to invest during times of market stress can not only help you navigate tough economic times but also lead to significant gains in the long run. In this blog post, we’ll explore some strategies for investing during periods of market stress to help you make informed decisions and come out on top.

Investing is a smart way to secure your financial future. However, as with most investments, there are risks involved. One such risk is market stress, which can cause a major impact on your portfolio diversification strategies. In this article, we will discuss how to invest during times of market stress and what measures can be taken to protect your investments. We will take insights from Christian Mueller-Glissmann, head of asset allocation research within portfolio strategy at Goldman Sachs Research, who was featured in the recent episode of “Exchanges at Goldman Sachs” podcast.

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Understanding market stress:
Market stress is a situation where market prices experience significant declines or fluctuations due to various factors such as economic downturns, political instability, or even natural disasters. During these times, investors need to be extra cautious, as market stress can have a significant impact on their investment portfolios. It can lead to significant losses, negatively affecting their financial goals.

Strategies for investing during market stress:
Investing during market stress does not mean that investors should avoid investing altogether. Rather, it presents a unique opportunity to make smart investments that can yield great returns in the long term. Some strategies that investors can employ during market stress include:

  1. Diversification: Christian Mueller-Glissmann emphasizes that diversification should be a priority for investors. Diversifying your portfolio means investing in a variety of assets, such as stocks, bonds, and real estate, that don’t have a strong correlation with one another. This strategy can help reduce the risk of significant losses during market stress.

  2. Long-term thinking: Investing during market stress requires investors to take a long-term view. The stock market is inherently volatile, and it is not uncommon for it to experience significant swings in the short term. However, it generally recovers in the long term. As such, investors need to take a long-term view when investing and avoid making rash decisions based on short-term fluctuations.

  3. Dollar-cost averaging: When investing during market stress, investors can consider using a dollar-cost averaging strategy. This strategy involves investing a fixed amount of money into the market at regular intervals, such as monthly or quarterly. By doing so, investors can take advantage of market lows while reducing their overall risk.

  4. Investment in high-quality companies: During market stress, investors should focus on investing in high-quality companies that have a strong track record of weathering market volatility. These companies tend to be leaders in their respective industries, with a proven business model and a competitive edge over their rivals.

Investing during times of market stress may seem daunting, but it provides a unique opportunity to make smart investments that can yield great returns in the long term. By diversifying your portfolio, taking a long-term view, using dollar-cost averaging, and investing in high-quality companies, investors can protect their portfolios and reduce the impact of market stress.


Q1. Can investors use borrowed money to invest during market stress?
A. It is not recommended to use borrowed money to invest in the stock market, especially during market stress. Borrowing money to invest amplifies the risks and can lead to significant losses.

Q2. How frequently should investors rebalance their portfolios during market stress?
A. It depends on the investor’s investment goals and risk tolerance. However, it is generally recommended to rebalance portfolios at least once a year or more frequently if necessary.

Q3. Is it essential to seek professional advice before investing during market stress?
A. Seeking professional advice from a financial advisor can be beneficial. Professional advice can help investors make informed decisions, especially during market stress and to navigate critical market trends.

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Q4. Can investing in gold or other precious metals be a viable strategy during market stress?
A. Investing in gold or other precious metals can be a viable strategy during market stress as they are considered to be a safe haven asset during times of economic uncertainty.

Q5. What role do emotions play during times of market stress?
A. Emotions can play a significant role during market stress, often leading to irrational decisions. Keeping emotions in check, and sticking to a well-thought-out investment strategy can help investors navigate market stress successfully.