Bear markets. Yuck. I literally can’t think of anything worse. Except I can: a bear market that lasts a lot longer than anyone had ever thought possible. The thing is no one can time markets, let alone these kinda ones. Bears will just do their thing. They’ll rip into whatever they please and when they’re done they’ll be on their way. How big the bites will be and how long they’ll linger for is totally unknown. Anyone who tries to tell you otherwise is lying!
We’ve now officially entered bear market territory: a decline of 20% or more. And some markets have totally eclipsed that mark! Not that it’s a competition, obvs. US stocks have suffered their worse first half of the year since 1970. The worst performance in half a century, guys. That ain’t pretty. The Nasdaq (aka tech space) did even worse, losing nearly 29.5% in what was its worst half year. Ever.
This fall managed to beat the crash of 2002 which, guys, was the height of the dotcom bust! Comforting stuff. And if this isn’t enough, 10 out of 11 US sectors are in the red this year. The super 1 out of 11? Energy.
A lot of wealth. Vanished. Poof.
During the first half of this year, $13trn was wiped out from global stocks. That’s a lot of wealth that literally went into thin air. Oh, and if you think that gov bonds were a hiding place, think again! US Treasury bonds had their worst half since 1788 afters slumping more than 13%. Other traditional hedges (like gold, like the YEN) were all useless. Welcome to this topsy-turvy reality where what we thought was true isn’t.
That’s a lot of worsts. But the question is, is the worst behind us? Surely the only way is up, right? RIGHT?! No one knows. Tomorrow is as unknown as next year is. That’s where the risk (and opportunity) lies. So no matter where markets go, you’ve gotta be able to keep your cool and not derail your entire investment plan and your financial future along with it.
#1 Shift your perspective
Bear markets are psychological testers. They’re not about numbers, they’re about emotions. They test us whether we can really handle all the risk we’ve taken on. And whether or not we’re in for the long-term. When the going gets tough, how will you react? Will you stick around?
But if there’s one thing that I’ve found to help me during my first ever bear market is to shift your perspective. When stocks fall, see it as a sale. And if you, like the rest of us, love a good bargain, you’ll want to stock up! Sales are things to take advantage of, not to run away from. While inflation is ticking up, my pounds are able to buy way more stocks since they’re prices have tanked! You’ve gotta look at it like that or else you won’t really be able to take advantage of these market lows.
And if you can adopt this mindset when stocks tumble, you’ll come out the other side stronger and richer for it.
After all, the cheaper you buy the stock, the greater the upside.
#2 Don’t panic-sell!
It’s human nature to want to run for the hills when things go wrong. It’s built into our psyche. So it’s only normal that when things start to go from bad to worse as is the case right now; inflation is ripping through everything and earnings are not holding up that we want to abandon everything.
In these moments, we’re not acting rationally. We’re acting with our emotions. And we let them get the better of us. This panic-selling comes from fear. Our fear is of losing of money. We hate it. We literally can’t bear it. So, when the worst happens, we want to scramble for the exit door.
It’s normal to hate losing money but the minute you let that fear get the better of you, you’ll forever sit on the sidelines. Sure, you’ll be ‘safe’ but is that really why you’re here? Safe spots ain’t gonna get to where you are to where you wanna be. You’ve gotta take on some risk and part of that process is that you’ll lose money. It’s inevitable.
And if we don’t overcome this fear, we won’t survive downturns, let alone bear markets. We’ve got to be able to take our losers with our winners.
The minute you click ‘sell’ you’re converting your paper loses into actual ones and with that, you pull out the roots that were starting to grow.
Think long-term and don’t act short-term.
Holding on (and buying more!) during bear markets is one of the hardest things to do, but it’s also the most rewarding. In every sense of the word.
So hang on. You won’t regret it. Markets always recover. It’s a question of when not if.
#3 Don’t try to time a single thing
More money is lost trying to time bear markets than the bear markets themselves! When panic hits, and the bear rears its ugly head, that’s when the most mistakes are made. We suddenly go into survivor-mode. We think the world is coming to an end, at least the investment one, and we wanna do all we can to protect ourselves.
So we’ll shift around our portfolio. Ditching our growth stuff, the pain stuff and all the rest that’s causing us a stomach ache and we pile into safe stuff. Like gold. Like gov bonds. But guess what? These ‘safe’ havens did terribly. Even with a war going on, gold has gone down. And gov bonds? The US ones are down ~13% this year. So much for a safe haven right?
Since we can’t time markets, by going into survival-mode we might miss out on the market’s best days! And you know what they say, you can’t make up lost time. You’ve missed it, you’ve missed it.
Instead, focus on what you can control: how long you’re investing for and your consistency over that time. Dollar-cost averaging will be your new best friend.
During times like these, it’s important to double-down on your conviction and your investment strategy. You need to remind yourself why you came here in the first place – your one-way ticket to financial freedom!
Decades not days,
Freedom not fear.
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.