3 Things Every Investor Should Do During a Bear Market
- Investors need to accept that crashes and bear markets happen. Have a plan to “buy the dive”.
- For regular investors, I recommend 90% ETFs and 10% “initial shots” – that is, specific strategy bets.
- During a bear market, you can buy quality business at a discount, so make the most of it.
A bear market, when stocks fall 20% or more from recent highs, is always a double-edged sword for investors.
On the one hand, you have fear and panic. On the other hand, opportunity. One investor understands how to take advantage of both sides better than anyone else: Warren Buffett.
I have always admired Buffett’s advice to “be greedy when others are afraid; be greedy when others are greedy.” He used this strategy to add more than 50 billion dollars to his plan
Today, you have the opportunity to take advantage of these same principles to achieve financial freedom. Here are three basic principles for buying during bear markets with recent updates for investors in their 20s, 30s, and 40s
1. Accept that market disruption is part of investing
Since 1929, there have been more than twenty
The best thing you can do as an investor is to plan ahead for them. The economy is going through cycles, and you are likely to see a file
Or the market crashes multiple times over the course of your investment journey.
Planning for a breakdown does not imply market timing. If you pay attention to the headlines, “experts” mistakenly predict when the next crash will occur on a weekly basis. Nobody knows when the next will come.
But you can always be prepared by:
- Having a lot of money
- Building an “all-weather” portfolio
- Advance planning with your advisor
You want to win the good and the bad markets. To do this, you will need a strategy in place before the collapse.
2. Have a strategy to buy snorkels
Don’t just blindly follow Twitter’s advice to buy a dip. Have a plan to buy.
Here are some things to think about beforehand.
- Do you buy individual stocks?
- Are you buying the whole market?
- What is your schedule for purchasing?
For the average investor, I like a balanced approach to investing that is about 90% ETFs and 10% “first shots”.
ETFs allow you to buy the entire stock market at a discount without putting your eggs in one basket. Base Points 10% are strategic bets on individual stocks, industries, or asset classes.
There is no need to put all your money to work at once. Spreading your investments by averaging the dollar cost in the market helps you take advantage of the pullback while smoothing out the constant ups and downs.
To find the right investment approach, be clear about your goals and risk tolerance.
A financial advisor can be a valuable guide.
3. Buy high-quality companies with “economic moat” at a discount
If you’re going to buy individual stocks, follow Buffett’s strategy of buying a large business for sale. He’s an investment student to this day, sifting through companies’ financial statements to find the best opportunities.
What makes a great business?
- A healthy balance sheet (debt ratios tell you a lot)
- competitive advantage; large market share
Learn how to identify these companies before an accident occurs. And when you buy, consider the possibility of 10 years. Don’t worry too much about where the price will be one month or even one year from now.
You aim for long-term growth over 10 to 20 years.
Finally, remember that you are not alone on your financial journey
Partnering with a financial advisor to build an “all-weather” plan can relieve a lot of anxiety and even turn a panic into an opportunity.