A bear market will occur naturally from time to time, and you’ll want to be ready for when it happens.
A bull market can feel like it lasts forever but it’ll eventually subside, which is when you should have your portfolio at the ready to adjust to the change.
Being prepared for the possible changes in the market is basically half of the work you’ll be doing, and we’ve put together some helpful tips for when a market becomes bearish.
Handling your short-term goals is crucial, and if you’ve been preparing for contingencies, you probably won’t find yourself in a situation where your financial well-being is up for debate, regardless of the state of the market.
Keep reading to find out what should be your course of action in the event of a bear market appearing and what you can do to come out on top.
Set aside resources for emergencies
Hoping for the best and preparing for the worst could be considered one of the best ways to approach investing, as you’ll always have some sort of fund to rely on in case things begin spiraling out of control.
Generally, experts recommend having 6-12 months’ worth of income set aside for a rainy day, and this is even more important if you’re already retired, as that money will be the only form of income you’ll rely on until you get back on your feet.
That being said, retirees should also have at least a few more years’ worth of bonds or some other reliable asset that is set to mature when their income is expected to run out.
As simple as people make retirement out to be, it takes a lot of careful planning and clever investing to remain financially secure all throughout your retirement years, and not having to worry too much about surprises is one of the money things you should ensure.
Keep your goals in mind
Your investment portfolio should be a reflection of your short and long-term goals, and it should be structured in a way that complements said goals.
This means that the money you’ve designated for a short-term goal, or the money that you absolutely can’t afford to lose, should be invested in a relatively safe asset like a market fund or a Treasury bill.
On the other hand, money intended for mid-length goals, usually between 3 and 5 years, can and should be allocated to assets that are slightly riskier, as you can definitely deal with any contingencies that may come up during this time.
Finally, the money that you won’t be needing for at least 5 more years should be invested in assets that demonstrate a lot of growth, such as stocks and even cryptocurrencies as of late, which can generate an immense return on investment, albeit at the cost of being much more volatile as well.
Diversify your portfolio
It goes without saying that you’ve probably heard about portfolio diversification more than a few times, and it’s probably because it’s impossible to overstate the importance of not having all your eggs in one basket.
A diverse portfolio helps you cushion the impact of your losses, and if you’re fairly new to investing, expect to have a lot of them, which is exactly why you should make sure that even when you’re losing money, you’re staying ahead of the curve.
However, this doesn’t mean that only your portfolio should be diverse, but rather, that the maturing dates of the investment-grade bonds you’ve got in it are also varying, allowing you to always have some extra money to reinvest in other assets on the market.
As for your long-term assets, you should make a split between domestic and international stocks, as it’ll allow you to have access to a much more global market instead of focusing on the US.
Find a reliable professional
Behind every great investor is an even greater investing advisor, and with the digital age we’ve managed to overcome the need for expensive, experienced investors that will guide us through the process.
In fact, you can download a great number of free apps on your phone that will give you the inside scoop on the current state of affairs in the market and lead you through the best picks for your portfolio with the current market projections.
Of course, some have yet to embrace the wonders of technology, and would still prefer to have a live human being collaborating with them, which is perfectly fine, although you’re much more likely to encounter errors by doing so.
That being said, a professional can simplify the current situation in the market to a great degree for you, and they can walk you through a review of your portfolio, providing some much-needed insight on which of your assets should go and what you could do to make it more effective.