Make downturns work for you
Peter McGahan
Monday 8th June, 2026.
THERE is a dangerous sort of investor who gets emotional during a market fall.
Downturns are painful. They frighten people because the headlines are loud, and the recovery date is never printed neatly on the first page. Nobody rings a bell at the bottom. In fact, if anyone does ring a bell, it is normally to sell you something.
But there is a sober way to make downturns work for you.
UK market history is a useful cold shower. AJ Bell’s analysis of FTSE All-Share bear markets found an average peak-to-trough fall of 37 per cent, lasting 385 days, with the average recovery taking 648 days. The recovery usually took longer than the fall. That matters because many investors can tolerate the first few weeks of drama, then slowly lose patience in the dreary middle. The market does not just test your courage. It tests your boredom.
The same analysis also found the FTSE All-Share had recovered fully from all 10 prior bear markets studied. That is not a promise about the next one, but it is a reminder that downturns are not an interruption to investing. They are part of investing. The fee for long-term returns is paid in uncertainty, bad months and occasional years which make you wonder why you ever opened the statement.
For fund investors, buying the bargains left behind by panic rarely means picking a single heroic share. It means three less theatrical things: rebalance, keep contributing, and do not switch funds merely because they had a bad year.
Rebalancing is the grown-up version of buying low. Suppose your plan is 60 per cent equities and 40 per cent bonds or cash-like assets. After a heavy equity fall, shares may only be 52 per cent of the portfolio. Rebalancing pushes you back towards the original plan by buying equities when they are cheaper, not because you feel brave, but because your rules told you to.
Vanguard has shown how a 60/40 portfolio left alone from the end of 2003 would have drifted to around 80 per cent equities by the end of 2022. That is not a small wobble. That is a different risk profile wearing the same old label. Rebalancing keeps the portfolio honest. It also stops successful assets from quietly taking over the whole plan like ivy on a wall.
Continuing contributions is the second discipline. If you invest monthly into a pension or ISA, falling prices mean your regular payment buys more units. A £500 contribution buys 50 units at £10, but 66.6 units at £7.50. If the price recovers to
£10, the units bought at £7.50 have gained a third. That is pound-cost averaging in plain clothes.
The investor who stops contributions during the fall because they are “waiting for things to settle down” does the opposite. They stop buying when prices are cheaper, then resume when confidence has returned, and prices have already moved. It feels safe. It is often expensive.
The third discipline is not switching funds after a bad year unless the reason you bought the fund has genuinely changed. A bad year for a UK equity fund in a bad year for UK equities is not automatically a fund failure. A global growth fund falling when global growth shares are falling is not a scandal. It may simply be the fund doing exactly what its label said it would do, only in the direction nobody enjoys.
The real damage is often behavioural. Morningstar’s 2025 “Mind the Gap” work found a persistent 1.2 percentage point annual gap between fund returns and what investors earned, roughly equivalent to missing around 15 per cent of funds’ aggregate total return over the period studied. The culprit is usually poor timing: buying after strong performance and selling after falls.
Fidelity’s UK data, using Refinitiv Datastream, is more brutal than any warning label. Over the 15 years to January 2025, an investor fully invested in the FTSE All-Share achieved 7.64 per cent a year. Miss just the best 10 days out of more than 3,750 trading days and that fell to 4.51 per cent. Miss the best 20 and it dropped to 2.40 per cent. Miss 30 and you were down to 0.50 per cent. Miss 40 and the return turned negative, at minus 1.22 per cent a year. That is the cost of “waiting for things to calm down”.
Panic leaves bargains behind. The trick is to let your plan quietly pick them up.
I will be creating a guide to investing, so, if you would like a complimentary copy, please email info@wwfp.net. If you have a financial enquiry, please call 01872 222422.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
