Can you stay cool during a bear encounter?
"Bear markets"—meaning a decline of at least 20% from a market peak—are actually fairly common. Do you have the instincts to stay cool?
You're face-to-face with a bear. What's your better bet?
History suggests it's best not to make any sudden moves. If you have an appropriate long-term portfolio, then you should be able to sit tight.
Sorry, you just became a snack.
The better bet is generally to stay calm and stay invested. (Selling during a bear market often means you miss out on any eventual recovery.)
The best way to beat a bear is to:
Switching your investments around in response to market bounces often tends to backfire. The better plan is usually to stick with your plan and wait it out.
You got it!
Try not to panic. If you’re a long-term investor then you’ve got time to let the market recover.
The best way to prepare for a bear is to:
The best time to prepare is well before a bear comes along. Make sure you hold appropriate investment mixes for your goals and time horizon. That way, if or when you encounter a market decline, you’ll already be prepared.
Staying in cash forever may seem like the best way to avoid risk, but it actually comes with plenty of risk too (ahem, there’s this thing called “inflation”). Better bet is to come up with an investing plan you can live with in good times and bad.
When the market takes a big drop, savvy investors often:
Savvy investors are more likely to see a big market drop as a buying opportunity (like getting a big discount on their favorite stuff).
Imagine how much you’d buy if your favorite grocery-store-splurge went on sale for 20% off. That’s how big-time investors look at it.
Now you'll know just what to do the next time you see a bear!
Want to stay bear-aware? Subscribe to the weekly Viewpoints newsletter below.