What are the Best Bear Market Investing Strategies?
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- Updated On:21-Jan-2021
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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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Discussion (0)
Bull markets are identified when the stock sees a rally in its price, increasing, and there are lesser chances of it crashing. Conversely, a Bearish market is when the stock market plunges, and the stocks lose its value due to several reasons affecting its performance. Mostly the color green on a stock market chart is bullish, and the color red is bearish. However, these are prolonged over a couple of days to determine the nature of the market.
For significant returns, one can look forward towards stock funds, real estate investments, dividend stocks, target-date funds and so on. Each one of these investments does offer something better to investors based on their capital of investments made.
Discount brokers have gained a lot of popularity in the past couple of years. Zerodha is currently India's largest and most trusted discount broker which is also the best option for beginners. It has all the necessary qualities required for a good broker like low commissions, low-maintenance charges, high-quality trading terminal, etc.
We all dream of getting rich. A bullish stock market is a golden opportunity, if you already bought stocks when the market was bearish. So, let's see how can you get rich in a bullish market when the stock prices are rising.
The best stocks for college students to invest in in India are those with strong fundamentals and high dividend yields, such as Reliance Ltd., ITC Ltd., and Infosys Ltd.
When talking about the best stock broker in India, we cannot rule out Zerodha. It is the market leader in bargain stockbroking, is premised in Bengaluru, and accounts for more than 15% of total retail trading activity in the country. Mr. Nitin Kamath formed the leading brokerage firm in 2010 Kamath, and it now has a customer base of over 6 million.
There are many stocks of companies that could be invested in. For example, companies doing good in the FMCG sector, Healthcare sector, Banking sector, Consumer product sector could be invested in. these are just a few as plenty other companies could be invested in based on your requirements and strategy for investing.
There are various terms that play a huge role in determining how to choose stocks for long term investment such as P/E ratio, dividend consistency, etc. For a more elaborative information head below and read the explanation given for better understanding.
The Mirae Asset NYSE FANG Plus ETF Fund is a good option for Investors who want foreign exposure. The Equity allocation is very concentrated to just 10 stocks which makes this ETF very volatile and risky. This ETF consists of the top 10 stocks in their respective sectors mostly TECH, like Amazon, Netflix. Facebook, etc. Hence Investors with high-risk tolerance and a long time period should consider this fund.
Nifty and Sensex and two stock market index given to the top performing, financially established and stable companies where most of the individuals prefer investing.