Bear market depicts a condition where there is a decline in asset prices. The number of its decline could hit at least 20% from recent highs. Theoretically, there is nothing to look forward to in this situation, battling with the condition is also very risky. Thus, if you encounter falling stock prices, this article would spill secrets on how you could survive.
The foremost strategy is fear management.
There is this famous quote in Wall Street saying that the Dow climbs a wall of worry. The dow in this occasion follow the rise of economic disruptions on invasion, terrorism, and etc. In times of fear, investors should try to separate emotions from decision-making.
Taking the advantage of dollar-cost-averaging (DCA)
It is very common for the stock market to go through a negative moment. For long term investors, it is important to take the advantage of dollar-cost averaging. This way they could purchase shares regardless of price. Thus, you can buy at a low price when the market is down.
Don’t stand a chance
For both the bear and bulls moment, don’t stand a chance to survive. There’s an old suggestion that it is better to play dead during bear markets. Fighting back is not a good suggestion. You must stay calm not to make sudden moves.
Understand the core diversification
The core diversification is portfolio spread among stocks, bonds, cash, and alternative assets. This would be highly dependent on your risk tolerance, horizon, goals, and many more. Every investor encounters a different issue. But the key is to have a proper asset allocation strategy. This would help you in times of bear market.
Know your investment horizon
It is important to note that you should invest at the limit where you can afford to lose. Investors should get involved in equities at least five years or longer. Not only bear market, minor corrections could also cause major loss.
