Investment Strategies to Withstand the Bear Market
What is the Bear Market?
You might already know this, but here is a brief introduction to what a bear market is. In simple terms, when a market is experiencing prolonged price declines, it is called a bear market. It is a situation where the prices of securities fall under 20% or more. Bear markets are sometimes accompanied by economic downturns like recessions and more. It is also accompanied by negative investor sentiments. A decline or fall for a moment is not considered to be a bear market, it is called a bear market when it goes on for a long period of time.
Why Do You Always Need an Investment Strategy?
Your investment strategy is more like your game plan to build your portfolio. It is always important to plan your strategy, irrespective of how much you are flourishing right now. You know how much we spend planning a day, vacation, or buying something new, but there are times when most of you forget to plan the mapping of an investment strategy. The bottom line comes around to you being able to direct to all the downfalls and opportunities out there while you invest. Having a strategy is like having the manual to open the world’s greatest locker. You might not know what you would face in the market, but being prepared for a pre-sketch of all the upcoming events is a good way, and you will be able to sustain the market.
Strategies that Will Let you Survive the Bear Market:
Sharp declines or bear markets are bound to be in the market and the environment. It is inevitable, and if there ever comes a time, it is you who should be prepared for it. It can be uncomfortable, and it can be threatening too. But you need to survive it and potentially try to benefit from it too. You come into the stock market when you know what is up there for you, it can be bad or good, and it comes up to the survival of the fittest, and you have got to build your strategies to survive it. Here are some strategies you can take into note:
1. Hold your Ground
Fight or flight are two primary instincts we have as humans, and flight as soon as the market goes down or struggling to just get out is a mistake that a lot of investors make. While you choose to move out of the market or sell all and leave as soon as the bear market has come into view, you will miss out on a lot. There is a very high probability that you will be heading towards a huge loss of your capital. While you are just standing on the sidelines and watching the market, you will lose all of the rallies towards the recovery. So hold your ground and stay in the market. On the road to recovery, you have a lot of high probable chances to benefit.
2. Give your Risk Tolerance and Goals Another Deep Look
If you are about to retire or cannot afford a loss, you might want to look back and see what you can manage. You can never deal with a bear market the way you would deal with a bull market. It has to be handled in a different manner, you know it. You know how uncomfortable it can get when your asset value declines in rate and value, but you still need to fulfill your goal. So if your risk tolerance is low, you might want to invest in high-grade corporate and municipal bonds that give you assured returns, even if they are at small prices. But on that note, after the recovery, you might not see a great gain too.
3. Do Not Click on the Stop Button at Investing Consistently
You can always keep investing a fixed amount irrespective of the market conditions. By this, you are more likely to be able to purchase equities at affordable prices. By this, you can also keep seeing the rising values of shares when the market rebounds. Making regular contributions adds up to your portfolio, and it is also the dollar-cost-averaging strategy to do this. Out of fear or loss, do not stop investing even if it is a small amount; keep investing.
4. Have an Eye for your Opportunities
You can always find opportunities, even in the worst of situations. All you need is a good eye to find out where your opportunity is. Defensive stocks like consumer staples, medical and utilities, as well as the companies with high-quality businesses and balance sheets have been known to be the stocks that offer the best of the opportunities even in a bear market. Sometimes you can also find stocks that pay dividends, which can help to boost your return even when the prices are falling. You can be put in a hectic situation that seems to have no way out, but you can still make opportunities out of it if you take into consideration different perspectives.
5. You can use a Financial Advisor
We are all humans, and sometimes emotions get the best of us. So get some professional help, and it could make things much better. An advisor can be someone who can analyze your financial approach and offer insightful investment help. It can be helpful to affect your investments with the downturn of the market and match your long-term and short-term goals.
Bear markets are common, and you might know this. Did you know, since 1900, there have been 33 bear market scenarios? The three most recent ones were the dot-com crash (2002), the financial crisis (2008-2009), and the COVID crash (2020). You mostly came across it, but when you turn back and look at the people who profited even at these times, you would know you have to have good strategies and sustain in the market, and you will eventually survive and even profit from it. So, it will pass, and all you need to do is withstand it and adopt the right set of strategies.