For advisers, large market swings can prompt challenging conversations with clients, particularly when markets are falling and their portfolios are losing value.

Here, we share four key charts that can help advisers encourage their clients to maintain a long-term focus and stick with their investment strategies when markets turn turbulent.

Chart #1: Bear markets and corrections are a part of life. Stay focused on the long-term.

Since 1972, there have been 11 bear markets in global equities in Europe. But history shows that equities have typically recovered and have tended to post strong results over the long term.

Past performance is not a reliable indicator of future results.

Notes: The chart shows the MSCI World Price Index from 1 January 1972 to 31 December 1987 and the MSCI AC World Price Index thereafter. The shaded areas represent bear markets, defined as price decreases of more than 20%, and highlight the area from the time the index lost 20% until it recovers 20% from the subsequent trough.

Source: Vanguard calculations in EUR, based on data from Refinitiv, as at 22 March 2023.

Chart #2: Dramatic market losses can sting. Recoveries typically follow­.

When markets fall sharply, it’s important to stay invested in order to participate in the recoveries that typically follow.

Past performance is not a reliable indicator of future results.

Notes: Calculations are based on the MSCI Europe since 31 December 1969, using monthly data. A bear (bull) market is defined as a price decrease (increase) of more than 20%. The plotted areas depict the losses / gains ranging from the minimum following a 20% loss to the respective maximum following a 20% appreciation in the underlying index.

Source: Vanguard calculations in EUR, based on data from Bloomberg, as at 31 December 2022.

Chart #3: Timing the market is futile; the best and worst trading days often happen close together.

One reason investors shouldn’t try to time the market is they run the risk of missing out on strong performance, which can seriously hamper long-term investment success.

Historically, the best and worst trading days have tended to cluster in brief time periods, often during periods of heightened market uncertainty and distress, making the prospect of successful market-timing improbable.

Past performance is not a reliable indicator of future results.

Notes: The chart shows daily returns of the MSCI World Price Index from 1 January 1980 to 31 December 1987 and the MSCI AC World Price Index thereafter. The yellow bars highlight the 20 best trading days since 1 January 1980 and the tale bars highlight the 20 worst trading days since 1 January 1980.

Source: Vanguard calculations in EUR, based on data from Refinitiv, as at 22 March 2023.

Chart #4: What to do when volatility hits.

Remind clients to follow Vanguard’s five simple tips to help them avoid overreacting to short-term downturns and stay on course for long-term investment success.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results.

Performance may be calculated in a currency that differs from the base currency of the fund. As a result, returns may decrease or increase due to currency fluctuations.

Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

Important information

For professional investors only (as defined under the MiFID II Directive) investing for their own account (including management companies (fund of funds) and professional clients investing on behalf of their discretionary clients). In Switzerland for professional investors only. Not to be distributed to the public.

The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.

The information contained in this document is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.

Issued in EEA by Vanguard Group (Ireland) Limited which is regulated in Ireland by the Central Bank of Ireland.

Issued in Switzerland by Vanguard Investments Switzerland GmbH.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2023 Vanguard Group (Ireland) Limited. All rights reserved.

© 2023 Vanguard Investments Switzerland GmbH. All rights reserved.

© 2023 Vanguard Asset Management, Limited. All rights reserved.