Keys to Surviving the Bear Market

A “bear market” refers to a Forex Brokers List market that has declined in stock prices at least 15 percent to 20 percent. As such, it usually happens with a wide-reaching pessimistic sentiment about the market.

Obviously, these times aren’t really exciting to prepare for, but prepare for it you must. Fighting back is dangerous.

Good thing there are very effective ways in Forex News which you can help yourself survive a bear (market) attack. Don’t let it swipe all of your money. Read on!

Check Your Fears

It’s understandable that you get scared when faced with a bear market. That’s completely normal. However, you must always keep your fears in check.

That’s because sometimes, due to overactive bearish sentiments, we imagine our own enemies. After all, the stock market has historically survived all of the most disastrous crashes and corrections.

Use Dollar-Cost Averaging

One fact that will help you tremendously if you will only learn to accept it is that the stock market also has bad days, bad weeks, bad months, and bad years. It’s all part of the time.

If your time horizon is 10 years, or if you’re a real long-term investor, one of your options is to take advantage of dollar-cost averaging.

When you buy shares regardless of the price, you usually buy shares at a low price when the market is slumping. Over the longer haul, your cost will average down, providing you with a better overall entry price for your share.

Don’t do anything—play dead!

When you meet a real grizzly bear in the woods, your protocol is to play dead. You can use that same strategy when you’re in a bear market.

Staying calm and not making any moves, at least until the bear market’s attacks have subside, will help your save yourself from any potentially seismic move by the enemy.

In terms of the financial market, playing dead generally means you put a huge part of your portfolio in money market securities like certificates of deposits, US Treasury bills, and other instruments with high liquidity and short maturities.

Hunt for Value Stocks

The bear market can provide a lot of buying opportunities for investors.  The idea is to know what stock to look for.

For experienced investors, such as Warren Buffett, bear markets let you find value companies that sit at very attractive valuation.

Buffett builds up his position in some of these value stocks during bear market rule, since he knows that the stock market’s tendency is to drag good companies more than they deserve.

Find Non-Cyclical Stocks

Defensive or non-cyclical stocks tend to perform better than the overall market during not-so-happy times. Such stocks offer a consistent dividend and stable earnings, no matter the state of the overall market.

For example, companies that produce household non-durables like toothpaste, shaving cream, and condiments are defensive stocks because people will still use these products even in hard times.

Diversify

And lastly, investing is safer even in bear markets when you don’t put all your eggs in one basket. Should the bear decide to swipe one of your baskets, you can still save other baskets and flee to safety.