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7 things to do in a Bear market.

Updated: Nov 20





"Be fearful when others are greedy and greedy when others fearful"

Warren Buffett.


First of all, what is a Bear market? A Bear market is when there is a drop of 20% of the stock market for a sustained time.

Why is this is important to you?

This means stocks are on sale, they are giving them away with 20% discounts.

Let's dissect this a bit further.

Over the ages there have been a number of Bear Markets. Look at the graph below, shaded areas are bear markets and the days in bold are how long they lasted.

If you get bogged down in the recent market crash you will be overwhelmed and not invest a dime, however if you zoom out you will notice investing is the best thing you can do.

Bottom line, winter does not last forever, Bear markets have a beginning and an end.


See in this graph below all the bear markets.


Bear markets are areas shaded in gray and days they lasted in bold dating back to 1930's

Take a look at this graph from the S&P 500 in the last year, just a small space in time if you were to compare it to the past 90 years.


S&P 500 in the past year

Sure it looks scary if you look at it up close.

But when you zoom out and look at it over the past 90 years, don't you wish you would have invested in 1930's?

Why do I say this? Many are wary of the stock market in this time, rightfully so. There are simple yet effective ways of investing without losing your life savings.

Are you going to become rich overnight? No. But sure beats playing Powerball.

Keeping your money in the bank is best way to have inflation beat you.


Time in the market is what counts, not timing the market.



1- Invest in what you understand.

I do not understand cryptocurrency, therefore I do not invest in it.

Invest in the S&P 500. What is the S&P 500? S&P 500 are the 500 leading companies in the US, my son understood it.

Invest in Farmland. What is farmland? They grow food. Simple, everyone has to eat.

Real estate - everyone has to live in a house/apt or a trailer.


2- Dial down Debt.

Get rid of debt. There is no such thing as good debt.

Payoff the highest interest debt first, then work your way down to the lowest interest debt last.


3- Control expenses.

You do not need that $7 Latte from Starbucks, brew your coffee at home.

Bring your lunch to work.

I chose to spend money in experiences.


4- Own your home/apartment.

This way you can deduct the interest rate of your mortgage and claim homestead exemption. Both are excellent ways of getting some tax breaks.


5- Make yourself indispensable at work.

We are all dispensable, however some more than others. If you are the individual that is translating from English to Spanish the manuals for example, you will not be the first one to go when the going gets tough.


6- Dollar cost averaging.

Instead of investing a large sum of money for fears of a drop in the market, invest small amounts over time, spreading the risk over time.


7- See your PCP once a year

You need to stay healthy in order to navigate the turbulent times.


These are just a few things that I practice everyday which have helped me.


Till the next time.


JL


 

This blog is meant purely for educational discussion of finance. It contains only general information about financial matters. It is not financial advice, should not be treated as such.

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