Surviving a bear market is a skill that is in demand amongst investors; to learn effective adjustment methods, you may want to enroll in some finance classes. A bear market is period of time where stock prices decrease, and many people lose large portions of their wealth. The opposite of a bull market, a bear market sees many individuals selling at a substantial loss while panicking that the market will never recover. There have been many bull and bear markets over the past 100 years, so the last thing an investor should do is panic and completely stop investing. The following article will give you tips on how to adjust in a bear market.
The first thing that needs to be considered in any market situation, bull, bear or stagnant is what kind of investor you are. Do you want to take on a sizable amount of risk? Do you have 40 years until retirement to take some losses, or do you need to be relatively conservative because retirement is less than a decade away? Also, how have your current investments performed, and do you think those investments will perform worse than average in the next bear market?
If you have a long time until retirement, either because you are young or because you’ve lost a substantial amount of your wealth in the previous bear portfolio, the best option is to stay put. Don’t sell off your portfolio and take a huge hit in wealth. After all, you can’t lose money on an investment until you sell. Overtime, the stock market will yield at least a 7% annual return, so the bull markets most likely will offset the bear markets.
If you don’t have a long time until retirement, and you feel, and are advised, the bear market will continue for quite sometime, you may need to consider other options. If you can afford to retire on your current wealth, or what you can accumulate in savings, it may be smart to pull a portion of your wealth out of the stock market and invest in bonds, money market funds, and other low risk securities.
Another wise step to take is to consider what caused the current bear market, what sectors are suffering the most, and what sectors in the future could benefit from the current bear market. Gold, for example, has increased substantially since the 2008 / 2009 bear market began. Many of the nations wealthiest and savviest investors made there fortune investing heavily in the right industries during bear markets.
The last step is to be on the lookout for discounts. During the 2008/2009 bear market, almost all bank stocks were down significantly because a few had failed. In reality, these bank stocks were worth much more than their low stock price, and once things settled down the stock prices shot up considerably. There are always deals in a bear market. Online finance classes can help you learn how to identify and take advantage of these deals.