📉4 Tips to Surviving the Longest Bear Market Since 1973 to Make Sure your Portfolio Comes out Richer! 

The S&P 500 has been stuck in a bear market (down 20%+ from its high) for 221 days. This the longest running bear market we’ve had to face since 1973. This beats the selloffs that came with the dot-com crash in ‘01 and the financial crisis of ‘08. Safe to say, we’re in a bit of a pickle. 

For anyone that started investing during the pandemic (many are gen z) they got hit in the face with one of the most confusing, convoluted and crazy economic times. Perhaps ever.

Lemme give you guys a quick recap: stimulus (aka free money) flooded the system but then came inflation. We thought it would be transitory. Ha, what a joke that was. Then it started climbing the walls, getting stickier and stickier. Till it’s where it is now: at a cool 10% (in the UK) and interest rates – having gone from ground 0 is now on the 425th floor. 

The entire playbook that basically ruled the past 15 years has now been ripped into smithereens. Bear markets are hard enough as it is but having to navigate something we’ve not really seen before (or can even remember) since we gen z lot were toddlers when ‘08 came about makes it all the more difficult. 

Bear markets can be really quick affairs or really loooong, dragged out encounters like the 221 days of market pain we’ve all had to deal with! But what’s really interesting is how differently we act when our portfolio tumbles. Investing is so humbling – here’s why you should embrace it NOT avoid it!

Some of us will sell at the first sign of pain (a 20% fall is enough to spook anyone out) while others will keep ‘buying the dip’. And a whole bunch of variations in between. 

What will really determine your actions (or not!) during bear markets is how many of them you’ve actually lived through. If at all! 

A quick recap of the bear markets since the start of the millennium: 

2000-2002: This was the dotcom crash! The tech bobble popped and boy did that leave investors with some really nasty scars. The S&P 500 crashed by 36.8% in the space of 18 months. 

2007-2009: This was the global financial crisis aka the credit crunched that crunched us all. The economy went into a recession and it also marked the 2nd worst bear market in history. Lovely. 

2020: The covid crash! This one you’ll remember. On 11th March, the Dow Jones entered a bear market for the first time in 11 years. It crashed from nearly 30,000 points to under 19,000 but rebounded after barely a month as traders looked forward to an economic rebound. 

You can see there’s been a bear market every 10ish years or so. Obviously, it’s a very rough guide to go to but bears usually come around when a recession is on the cards. Here are 3 simple ways to recession-proof your portfolio & protect it from inflation.

Sure you can have phantom bears that are nothing more than a weird shock-to-the-system but usually they act as a bright red flashing warning light that trouble is round the corner. 

How are we dealing with this bear? 

Many investors are in wait-and-see mode. Global equity funds saw $8.89 billion worth of net selling. The biggest weekly outflow in 4 weeks. We’re holding more cash and fewer stocks. We’re not taking risks. We’re too scared right now.

Markets might have calmed down with stocks bouncing back from their lows but many investors remain on edge. They’re watching for signs that something else might break thanks to the Fed’s interest rate fight.

But waiting for the ‘right’ moment is like waiting to grow wings. You’ll be waiting a lifetime. You gotta be in it to win it.

You could be waiting on the sidelines and miss out on the market’s recovery – whenever that may be!

Here are 4 things to keep in mind as you bear the bear! 

#1 Nothing will prepare you for your first bear market like seeing it face-to-face! 

It’s hard to know how to best handle a bear market till you’ve actually been through one. You can read about it all you want (or in my case write about it till I’m blue in the face) but until you see your portfolio -20% (or more) you can never be too sure how you’re gonna deal with it! Until YOU go through your 1st bear market you will not know how it feels to see a % of your hard-earned wealth disappear. 

See how you feel when your portfolio tumbled. That should give you a pretty good indicator of how much risk you can actually handle. 

Knowing and seeing are 2 very different things! Sure, in theory we know more risk = more reward and if you’re in your 20s & 30s it makes sense to have more risk so that you can build your capital. But more risk also means more risk! It means the ride will be bumpier and not everyone can handle that. And that’s fine. 

You gotta see what works for you and this bear market gives you that chance to put your risk to the test! 

#2 Your first bear will be terrifying but you’ll soon learn how best to act 

The more bear markets you go through, the better you’ll be at managing your emotions. Since I bet >90% of your investment returns are determined by your behaviour, if you can build nerves of steel and not do anything rash, you’ll hopefully be okay and make it out in one piece! 

If you’re too scared to buy in bear markets, at least don’t sell. Do yourselves that one favour. Better yet, just lock your app and give your mum the password! That way you won’t even be tempted to mess around with it. 

The problem with having our investment apps at our fingertips is that we can buy and sell at the click of a button. In the olden days, they’d have to call up their broker to place a trade.

Imagine trying to sell Amazon when it crashed 92% in 2001. Not that you should’ve sold it, obvs. But just imagine. A total nightmare! But it adds a layer of protection for your portfolio. You’re not able to act immediately. You’ve given time to cool off and have a re-think. 

The more barriers you’re able to put between you and the bear, the better. Maybe apps aren’t as smart for us as we once thought. 

#3 Be happy this bear market is now, not later 

For anyone who’s just started out on their investment journey, you should be super grateful your 1st bear market is here now and not later! 

Now that we’re young, we can afford to mess up a little and make mistakes with our money (and everything else tbh!) since there’s way less at stake.

If we mess up a bear market in our mid-30s, this will have a much bigger impact on our life.

Our home-buying process will probs be delayed since we sold too soon and we might not have enough time to sit around waiting for markets to recover. We might actually need the money.  

Now you get to mess up. You get to test the waters. I’m hoping this bear market is the worst one we’ll ever see but you can’t be too sure! Though seeing as it’s the longest one since 1973, I’d say we got ourselves a pretty good taste of it. More like an entire mouthful that makes us wanna vomit. 

Now, we’ve got less money than our future selves. We’re losing less than we’d lose later in life and that should be comforting. When a bear bites off more than 20% of your portfolio, when you have £10k invested that’s £2k but when you have £100k+ invested that’s a good £20k gone. Just like that. 

#4 The pain doesn’t last as long as we think (or remember) it does 

S&P 500 bear markets are recoveries between 1956-2020. (R) = Bear market coincides with a recession.
Source: LPL Research & CFRA.

The years that had the biggest declines saw the biggest gains. Nothing lasts forever. Not the good times nor the bad.

The investors that were able to hold their nerve during those big fat downturns saw something stunning pretty soon after. This is not a fool-proof plan and as we’ve seen from this 221-day long bear market, no one knows when the tide will turn. Dare to live by these 3 words to rich-proof your future!

But you’ve gotta be in it to win it. It’s much easier to be in the market when the tide turns than try to chase that wave. You’ll miss out on the biggest gains. And as we know, if your portfolio misses out just 5 of the best trading days of the year, you’ll be sad. And poorer. It’s not worth chasing the hype. The momentum.

Stay sane and stay in your lane! Do your best not to worry what others are doing. It’s easier to follow the crowd but the crowd isn’t always right. Or early.

As I like to say, it’s better to be in the markets early than late! Sure things can always go down further but you wanna be there when things turn – in your favour. 

Also, note how the bear came before the recession. Markets are forward-looking. They see things before we all do. They anticipate. And when stuff go from bleak to slightly-less-so that’s when markets usually rise.

So don’t wait till the recession’s been and gone to invest. Keep investing. That’s the best thing you can do for your future.

Invest every month and quit worrying what share prices are doing. That’s the market’s job; not yours! 

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.

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