With the prolonged market downturn, no one can really blame you if you start feeling uneasy. Will the bear market last long? What should you do in the meantime?
Instead of letting the extended decline burst your bubble, there are a few things you can try doing for now:
Prevent Knee-Jerk Reactions
It can be quite tempting to jump out when there is a drop in the market and wait for the asset values to start climbing again. However, that knee-jerk jump may result in costly mistakes. Selling during a steep fall in the market will put you at risk of locking in a permanent capital loss. To optimize your long-term potential, time in the market is more critical than market timing.
Look for Strategic Opportunities
Defensive stocks have the potential of offering opportunities during a market downturn. You may even find some opportunities in the higher-quality dividend-paying stocks, specifically ones with a history of consistent growth of their dividends. These stocks can possibly increase your total return during the fall of stock prices.
Consult a Financial Advisor If You Haven’t Done So
If it seems that your emotions are starting to control you, it might be better to seek professional advice. A financial advisor will help you go through your financial approach once again and provide insights that can help limit the impact of the bear market on both your long- and short-term goals.
While the market recovers, the advisor will also ensure that you stay right on track and guide you in adjusting better while your priorities change over time.
Continue Your Consistent Investments
When you invest at regular intervals a set amount of money notwithstanding the market conditions, it is more likely that you can buy equities at more reasonable prices and possibly see a rise in the value of shares when the market starts bouncing back up
Making regular contributions every week or every month to your portfolio is a form of systematic investing that can possibly offer efficiency if the market falls.
Maintain Perspective
It doesn’t matter how long or deep the bear market continues to be, markets were able to bounce back in the past. Bear markets already happened before and anyone who studied the historical price charts will notice how these markets were able to recover and grow higher than they were before.
Any investor who stayed disciplined during a negative market will likely avoid common mistakes and possibly see better times ahead. When you stay invested longer, history reveals that you will also have a greater possibility of meeting most of your long-term goals.
Rebalance Your Investment Portfolio
During the long bull market, equities can depreciate or appreciate faster than your cash or bond holdings which can throw your investment portfolio out of alignment with your desired allocation of assets. During a bear market, consider it your chance to address the imbalances that occurred.
For example, if your investments are made up mostly of equities, it might be the time to sell some of your stocks and move this money to bonds or cash equivalents, depending on your specific situation and market conditions.
Do these tips and make it through the bear market unscathed.