Smart Investors in Bear Markets: What is their strategy?

Smart Investors in Bear Markets: What is their strategy?

A bear market is any investor’s nightmare; it is when most of the asset prices decline during the stock market’s downward spiral. Keeping your anxiety and fears from making your financial decisions can be hard during this time. Bear Markets occur on an average every four to five years. Nobody wants to be in a Bear Market; however, it shouldn’t stop you from anticipating and preparing for it. Historically, Bear markets are always followed by higher prices; nevertheless, some portfolios never recover from the damage. Therefore, it is important to understand the secrets of expert investors who have managed to keep their investment portfolios healthy during downtimes. Here are some of the best strategies you can adopt to successfully weather a bear market:

Keep your Emotions in Check:

The key strategy for success in stock market investing is always keeping your emotions in check. Fear isn’t helpful in effectively making money out of stocks. Bear Markets can be scary; watching your hard-earned money and portfolio shrinking can make you anxious, thus leading you to make irrational decisions. Of course, staying calm during a period of uncertainty is easier said than done. The best strategy recommended by investors is just to hold your stocks through the bear market, provided that you have done enough research while selecting your stocks.

View Bear Markets as Opportunities:

Bear Markets should be viewed as an opportunity to diversify and buy more stocks. Bear Markets are especially good times to buy more stocks as a majority of stocks reach cheaper valuations during this time. See this as an opportunity to invest in more stocks, thus diversifying your investment portfolio across all asset classes and risk variations. However, be careful to invest what you can afford to lose- meaning that you should invest only the money that is available after all the other monthly expenses are met. Bear Markets can be destructive; therefore, investing all your money into the stock market is not wise.

Pick Worthwhile Stocks:

Bear Markets is a time during which the valuations of all companies sit at an attractive price. Of course, it is a great time to purchase more stocks and diversify your investment portfolio to minimize overall risk. However, this doesn’t mean that you must invest in any company. The key strategy to winning in the stock market is the ability to pick good stocks that are worth investing. Look for the shares of companies that have a competitive advantage over all their peers. It is significant that you pick stocks with a long-term investment strategy in mind. Expert investors only look for businesses with an undeniable prospect for future growth and profit.


Invest in Defensive Industries:

Defensive stocks perform better than the average during times of market volatility and economic downtime. The products and services people continue to buy, irrespective of the market, come under this category. Examples of these industries are healthcare, consumer staples, utilities, etc. Defensive stocks are less risky and therefore do not provide incredible growth opportunities. But these stocks offer steady returns and shield your portfolio during financial downturns.


Leave a Reply