Its only natural to be concerned amid such market conditions. But selling off assets when prices are ator nearrock bottom is rarely the right move. Nor is necessarily the time to go on a buying spree either, in hopes that prices will trend back upward in the near future. 

Heres what experts say you should do when it comes to navigating a down market.

How to invest when the market is down

When the market is down, particularly for long stretches of time, it is considered to be a bear market. The Securities and Exchange Commission (SEC) defines a bear market as a time when stock prices are declining and market sentiment is pessimistic. In other words, when theres a decline of at least 20% or more over about two months. 

A Morgan Stanley report published at the end of October says stocks are down about 19% for 2022 and bonds down 15%. While thats not quite the 20% the SEC uses for its barometer, the current declines are enough to make investors nervous about how to handle their portfolios.

Some of the dos and donts for these types of conditions include not pulling your money out, continuing to invest based on your needs, and clearly understanding the risks of the current environment. And not to be overlooked, there may also be some room to take advantage of sound opportunities.

Avoid pulling your money out

Ideally, your investments are guided by specific investment goals and decisions that were based on your risk-tolerance as well as your short-, mid- and long-term plans. But when the market becomes volatile, it can be tempting to throw that careful planning aside and simply pull your money out of the market.

Lets face it, its hard to separate emotions from investment decisions, we are all human.  But, when you make an emotion-driven decision, you are likely not making a decision based on a plan, but in reaction to a triggering event such as fear-inducing headlines, says James Martielli, head of investment and trading services, for the retail investor group, Vanguard. 

The only time emotions should play a role, however, is when youre initially establishing your investment strategy and assessing your risk tolerance, adds Colleen Cunniffe of the Vanguard fixed-income group. Once that initial risk decision has been made, and its not one that should change frequently, then other investment decisions should be made based on data, analysis, and experience.

Volatile markets are created by short term uncertainties that are likely to evolve over time. Selling into those markets can mean you are executing on information that is misaligned with your long-term investment goals, Cunniffe says.

Invest based on your own needs 

Its also not a good idea to embark on a spending spree in a down market, simply because purchase prices may be cheaper. For the most part, here too, its best to focus on your long term plans and priorities, say experts. 

With the right research, a down market can provide opportunities, but they still need to be evaluated within the framework of your goals and risk tolerance, explains Cunniffe. 

Down markets can offer opportunities as long as those opportunities are fully vetted and are consistent with your personal investment framework. 

Assuming you would have to redirect existing cash to invest in a down market, it is important to realistically evaluate whether that is consistent with your long-term planning, Cunniffe adds. For example, if someone has cash set aside for emergencies or a rainy day fund, it would be unwise to use those funds to invest just because the market is down.

And, as with all investing, the timeline of your financial plans and goals is another important factor when buying stocks in down markets or otherwise. Youll want to have some sense of the time frame to recover for the purchases you make and make sure that timeline aligns with your investment goals.  

Ultimately, investment decisions should be based on data, analysis and experiencenot just rock bottom prices. It may be that there is a good reason an asset is cheaper today than it was last month and when that information is considered, it could be that what looks cheap is actually still expensive, she explains. I would no more buy a bond just because it is cheaper today than it was yesterday than I would buy a house on the same basisthe town may have approved a new garbage facility next door. You always need to do your research.  

Understand the risks of investing in a down market 

If you decide to make purchases amid the current market, be sure you understand the risks involved. Most significantly, the market may not rebound as quickly as you hope. While some bear markets last just a few months, others have lasted for a few years. 

Each down market has its nuances that will change both the magnitude and timing of any recovery, says Cunniffe.

Theres also potential for panic and sell-offs or worsening market conditions that drive prices down further.

Its still important to be cautious when investing in a down market. Stocks may be undervalued, but that doesnt mean they cant become even more undervalued. And, of course, theres always the risk that a market downturn could turn into a full-blown market crash, says Michael Collins, a CFA, professor at Endicott College in Beverly, Massachusetts and founder and CEO of the wealth management and financial planning firm WinCap Financial.  

Take advantage of sound opportunities

Even with all the drawbacks already mentioned, there are some potential opportunities for patient investors. Here are some of the possibilities to consider.

• Dividend-paying stocks: Dividend stocks still provide returns even in a bear market and in some cases may do even better during such downturns. As an added bonus, the price to buy these stocks may have declined during a bear market, providing an opportunity to access dividend investments for less.
   
• Bonds: For those seeking income, bonds may be an opportunity, says Victor Hernandez, Wealth Partner at J.P. Morgan Wealth Management. The aggressive rate increases by the Federal Reserve could provide an opportunity to consider bonds. Now for the first time in over 15 years, one can purchase short-term US Treasuries with interest rates above 4%, while U.S. corporate bonds are opportunities yielding mid-to-high single digits, Hernandez.

Yet another option is to study the sectors that have somehow been impacted by the current market, suggests Cunniffe.

For example, during the Covid market dislocation, our Active Fixed Income Research Team focused on Covid impacted sectors like leisure, restaurants and travel to identify opportunities to invest in sound credit stories at very attractive rates, she explains. 

The key to any investment decisions you make is to ensure you are basing your actions on research and evaluating your choices through the lens of your risk tolerance and time horizon. 

Focus on the long-term

The key message from all of the experts amid a bear or down market is that investment decisions should still be made within the context of your overall financial plan and backed by sound research. Continue investing based on your own financial needs and timeline and if you choose to take advantage of decreased stock prices to make some purchases, be sure you understand the risks involved.  

The inventory was compiled by Climate TRACE, a coalition of researchers, data analysts and non-governmental organizations who use multiple open sources including satellite coverage, remote sensing and artificial intelligence to track who exactly is polluting, and how much.

Emissions stemming from oil and gas production were already estimated to be about double what was reported to the U.N. last year and new data on methane leaks and flaring suggests that emissions are likely three times higher than what was reported, Gore said. Methane is a greenhouse gas which is around 80 times more potent in the short term than carbon dioxide.

Gore said the data shows the extent of the deep cut in greenhouse gas pollution we need to prevent the most catastrophic impacts of the climate crisis.

Hailing the launch of the inventory, the U.N. Secretary General said the data was vital to address a problem in front of our eyes, but also hidden in plain sight.

We have huge emissions gaps, finance gaps, adaptation gaps. But those gaps cannot be effectively addressed without plugging the data gaps. After all, it is impossible to effectively manage and control what we cannot measure, Antonio Guterres said.

Some 56 billion tons of greenhouse gas emissions were produced in 2021, and the Permian Basin was at the top of emitters with with more than 200 million tons, the data said. Russias Urengoyskoye gas field was second on the list with 152 million tons.

Saudi Arabia, which owns the giant energy company Aramco, produced 900 million tons of emissions from 252 oil and gas assets, the data showed. Egypt, the host of COP27, produces 383 million tons of emissions from 166 assets, with the countrys giant offshore Zohr gas field was the top polluter followed by the capital city of Cairo.

The data showed that power plants were responsible for just over 100 billion tons of emissions, or 26%, followed by manufacturing with around 68 billion tons, or 17%. Fossil fuel operations were responsible for around 65 billion tons of emissions.

Gavin McCormick, a co-founder of Climate TRACE, said they estimated greenhouse gas emissions of nearly all the largest emitters globally.

McCormick added that climate negotiators and others working to combat climate change have described the data as a game changer that can help them make better decisions and decarbonize faster.

The inventory was released as climate negotiators are convening in Sharm el-Sheikh in Egypt for two weeks to look for ways to implement global climate goals. The conference focuses on several prickly issues, including how to cut greenhouse gas emissions and boost finance for poor countries struggling with the impacts of climate change.

Al Gore said the world could reduce emissions by 50% by the end of this decade, and reach net zero by 2050, with the help of now-available technologies.

We are capable of solving this crisis because once the world reaches true net-zero, temperatures will stop increasing in as little as three to five years, he said.

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Associated Press climate and environmental coverage receives support from several private foundations. See more about APs climate initiative here. The AP is solely responsible for all content.

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