If you have been paying attention to the news the last few weeks, the stock market has seen better days. In the month of February, the stock market loss more than $1 trillion in value. The stock market has bounced back the last couple days, but the threat of a bear-sized shadow still looms over the market. While it is entirely possible that we are still in the throes of merely a correction, it never hurts to be prepared if it’s something more.
What is the game plan if this downturn becomes a bear? How can you survive and thrive in this kind of market? There are ways to pull it off. This article will help you prepare for the event that the market does turn that way.
Diversify Your Lineup
One of the best pieces of advice you can in any financial climate is to diversify your investments. The more outlets you utilize, the safer you will be in any sort of upheaval. Investing in bonds, stocks, real estate and other assets is the best way to create a diverse portfolio. Basically, all of your eggs in one basket is not a good strategy in any aspect of investing.
Don’t Make Any Sudden Moves
When the market takes a down turn, one of the best strategies to implement is to do nothing—play dead. Much like the approach when you encounter a real bear in the woods, play dead and do not fight back. During the bear market stay calm and do not make any knee-jerk reaction to any financial news or movements. It may be as simple as waiting out the storm.
Playing dead in the investing sense means dedicating more of your portfolio towards safer, steady investments like treasury bills or certificates of deposit. These investments can help you have sure footing in unsure markets.
Do Not Invest Beyond Your Means
By their very nature, bear markets can be quite damaging to investors. While it is important to invest, so is your day-to-day living and your home and using short-term funds like for mortgage or groceries should not go towards investing in stocks.
Never invest with money you cannot afford to lose, especially in a down market. If you overextend your funds you can end up hurting your future instead. Bear markets are not the time to get creative with your investments.
Find Value Stocks
Some investors look at bear markets as a giant opportunity, you just have to know where to find value. Getting stocks that have been chewed up and spit out by the market will be a good place to start. Bear markets typically depreciate the value of good companies because they get lumped in with the bad ones, which makes them look very attractive. The nature of the market is to punish the good companies more than they deserve, so take advantage of that.
Suppress the Worries
The market is cyclical. It’s important to remember that it has its ups and down, but the market does to continuously bounce back and rise. While it is understandable to panic during times of financial limbo, just remember that the market has survived wars, economic downturns, countries that fall and other catastrophes. What may seem like the end of days may just turn out to be a hiccup on the grand scale of things. Try your best not to worry in times of trouble. The market will survive–history is on your side after all.