en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en
This is actually a market condition wherein the prices of securities are falling.  There is widespread pessimism within investors about the market.  Because of this negative feeling, investors would continue to sell due to the anticipation of losses.
This only leads to growing pessimism.
Despite this fact, there are still ways to make money from a bear market; or at the very least not to lose money from investments.
Before going into that, you have to completely understand what a bear market really is.
Just because prices go down doesn’t mean it already denotes a bear market condition.  Before the market is declared to be in this position, there are certain statistics or data to be looked at first.
Although the exact numbers can vary, most investors have a downturn of 20% or higher across multiple broad market indices (such as the Dow Jones Industrial Average and Standard & Poor’s 500 index) that goes beyond at least a two month period would then indicate a bear market condition.
It is also important to note that you should not confuse a bear market with a correction which is always a short term trend that lasts less than two months.  Also, corrections offer great entry points into the market while bear market very, very rarely offer these opportunities.
During a bear market, it can be extremely dangerous to fight back.
It is hard to make huge gains during this condition because of the fact that predicting the bottoms can be very difficult.
But this does not mean all is lost.  There are ways to continue making money and protecting yourself during this time.
Most investors opt to ride out this market condition in hopes of avoiding losses.  They do this by hanging onto their stocks instead of selling them.  There is nothing wrong with this except for the mentality of most investors during this time which is pessimistic.  Because of this, people tend to panic easily and sell when the market hits the bottom or sell at completely wrong times.
Related: Here are some low-cost brokers for inexpensive trades.
When it comes to bear market strategies, the important thing is to be able to manage your risk properly.
That in mind, a good strategy is a very conservative fixed-income option.
How do you do this?  Well, a couple of years back there were some investors who actually took the high price to earnings ratio as a clear signal to invest in bonds.  This gives a modest return in an investor’s portfolio even when the market is down.
You can also make use of the “Mad Money” stock trading option.  This is good for active traders, but the most important thing to remember here is that this is a full time job.  You will always have to monitor the market, look for signs, and adjust to every movement as seen fit.  If you cannot devote this amount of time, then do not go for this strategy.
Another good way to protect yourself during this market condition is to go with a fund that has stocks the managers think would gain and that they sell short stocks.  Long-short mutual funds are considered to be safer than hedge funds since they are declared with the Securities and Exchange Commission so they disclose their holdings every quarter.
After all is said and done, if you simply aim to not lose money during a bear market to protect yourself, do nothing.  Ride out the market condition and do not give in to temptation and sell.  Do not give in to your emotions and panic.  Simply wait for the market to return to normal then make your moves again.
This is a guest article from IDLWave Investing.
February 11, 2013 at 9:49 am
Every bear market begins when valuations are high. Your asset allocation will be what determines your returns and in bear market CASH is an investors best friend. When you are unable to find stocks at a price that meets your margin of safety in value be willing to hold a higher level of cash. Then you will not lose the capital base with which to buy stocks a bargain prices when they are available.
February 25, 2013 at 12:51 pm
I agree with the post above. A bear market is the perfect time to utilize your cash and go bargain hunting. Trying to gain by a falling market is tough, because it often spikes back up unpredictably, and ahead of economic conditions. Getting caught short in an upward moving market can be crushing.
A Little About Me
I'm Glen Craig - I used to live paycheck-to-paycheck, drowning in credit card debt. I turned that all around and now I build wealth rather than debt.
My goal is to make personal finance easy for you.
Join our email list (FREE) and never miss an article!
Use Google Calendar To Pay Your Bills On Time
9 Things to Do When You Retire
Side Hustle-Make Extra Money Cleaning Homes
Four Ways You Can Pay Off Your Home Mortgage Faster
Don’t Forget Your 401(k) When You Leave Your Job! Here’s What You Can Do With It
Your 4 Step Guide on How to Stop Living Paycheck to Paycheck
What Is A Mortgage Escrow Account?
This is Why Your House Isn’t Selling – Here’s How to Finally Get Your House Sold
7 Ways to Get Rich Quick
What is Renter’s Insurance and Why You Need It
What Is a Probate Lawyer and When Would You Use One?
Money Market Account VS Savings Account – What’s the Difference?
Five Ways Fantasy Baseball is Like Personal Finance
Tools to Help Organize Your Taxes
Don't Let Your Goals Fizzle Out! - 5 Reasons Goals Fail, and What You Can Do To Make Yours Succeed
What Do You Think of New Year's Resolutions?
Tools to Improve Your Finances
Online High Yield Savings
All About Online Checking Accounts – Why Pay More Fees Than You Have To
Personal Capital Review - A One Stop Financial Center
Online Brokerages That Won't Break Your Bank
Credit Karma Review - Get Your Credit Score and More
Mortgage and Refinance Rates
Follow Us On Pinterest!
Follow Free From Broke's board Most RePinned and Popular {Free From Broke} on Pinterest.
Think Long Term When Shopping Black Friday and Cyber Monday
10 Essential Tips For Shopping Black Friday And Cyber Monday That Will Save You Money
How to Improve Your Credit Score Fast
What is a Refund Anticipation Loan (RAL) and is it Worth It?
Paying Taxes with a Credit Card: Pros and Cons
Free From Broke is for general information or entertainment purposes only and does not constitute professional financial advice. Be smart and do your own research or contact an independent financial professional for advice regarding your specific situation.
In accordance with FTC guidelines, we state that we have a financial relationship with companies mentioned in this website. This may include receiving access to free products and services for product and service reviews and giveaways.
© 2007–2022 Free From Broke A Personal Finance Blog For Regular Folks – All rights reserved.
No content on this site may be reused in any fashion without written permission from FreeFromBroke.com | Privacy Policy | Sitemap
Copyright © 2022 · Metro Pro on Genesis Framework · WordPress · Log in
We are using cookies to give you the best experience on our website.
You can find out more about which cookies we are using or switch them off in settings.
Go to mobile version
Close GDPR Cookie Settings
Powered by  GDPR Cookie Compliance
This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.
Enable or Disable Cookies
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.