What are the Best Bear Market Investing Strategies?

Short Answer

A bear market is the tendency of the financial market to take a negative turn for a long period of time, typically at least 2 months. The market experienced a general drop in prices for at least 20% from previous highs over at least 2 months.

Detailed Answer

Bear market hurt and are the dreariest time. Even the most level-headed person knows how daunting it can be. It is during those times of market plunge that your patience, understanding and self-restraint are tried and tested. You are tempted beyond measures to succumb to the pressures and pessimism. However, witnessing a bear market doesn’t have to be all bad and negative. Learn how to adapt, survive and thrive with these investing strategies.

A bear market is always accompanied by high investor optimism, widespread fear and panic. It can also follow financial downturns and economic recession.

5 Ways to invest in a Bear Market

Here are investing strategies that can help you sail through even the toughest bear market:

1. Invest in Blue-Chip Stocks

Blue-chip companies rank among the world’s biggest companies. They are industry leaders with large market caps, which makes it difficult to unseat them. Although they aren’t immune to tough market times, they have a long-standing reputation of always getting back on their feet. Since they are less sensitive to market fluctuations, investing in these stocks is a way to protect the investment portfolio.

2. Use Dollar-Cost Averaging

In a bear market, most investors are panicking and assets are underpriced. How about using that time to buy assets or stocks at a low point and sell at a higher point when the market recovers. With dollar-cost averaging, you continue to invest regardless of the market and even score the best deals.

3. Diversify to Reduce Portfolio Risk

A portfolio that comprises of different kinds of assets can lower the risk of any individual holdings. There should be a mix of bonds, treasury bills, stocks, ETFs, mutual funds, 401(k) and other assets.

For instance, if you put all your money in stocks, you might lose it all if the stock market crashes. However, diversification can help you reduce risk during the market plunge. By not putting all your eggs in one basket, you shield yourself from any crisis.

4. Discover Assets that Appreciate in Value

If there is anything the COVID-19 crisis has taught us, it’s that some industries tend to fare well even when others are experiencing their worst. Consumer goods, IT, cybersecurity, pharmaceutical companies are an example of assets that tend to perform well even during economic downturns.

5. Look at the Long Term

One thing is the bear market is inevitable. But the good news is they never last forever. In fact, they don’t stay as long as a bull market. Hence, have a long-term investment horizon and simply hold on till the market bounces back to normalcy.

Bearish Market - A Final Take

A bear market might not be bad after all, if you have the right investing strategies in your arsenal to weather the storm.

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