Investing in a Bear Market: Experts Share Their Best Tips

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If you invest in an ETF that tracks the Dow, you’re down 15% on the year. If your index fund mirrors the S&P 500, your year-to-date losses are more in the ballpark of 20%. Nasdaq? You’ve shed 28% since the start of January.

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On the whole, it’s been a lousy couple of quarters, and all of that red can mean only one thing: Stocks are most definitely in a bear market.

Checking in with your brokerage account is far more enjoyable when the bulls run the show, but that doesn’t mean you have to sit on your hands while you wait for Wall Street’s fortunes to change.

Here’s what experts say about investing in a bear market.

The Pros and Cons of Bear Market Investing

You have every reason to feel anxious about the ongoing market downturn. Bear markets can erase years of hard-fought investing gains, shrink your wealth and reduce the value of your assets. They’re also a hallmark of a recession — although that hasn’t happened yet — and the worst bear markets can drag out for years.

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That said, downturns offer a unique chance to get in at the bottom ahead of the recovery that is always just around the corner.

“A bear market can be a great opportunity for investors because it has historically been followed by significant growth,” said financial expert Jensen Lee, the founder and overall investor for bidetsPLUS.

It’s not unusual for otherwise strong companies to see their stocks beaten down to artificial lows during market downturns, but that gives investors golden opportunities for growth.

“With the market being so low,” Lee said, “there are usually companies that have gone through some sort of restructuring or rebranding and are available for purchase at good prices.”

The primary con, of course, is that the rebound might not come soon enough for the companies you’ve bet on.

“The value of your investments may not recover and you might lose money,” Lee said. “It can be quite challenging to invest during this time because the stock market may not have enough liquidity or financial stability to support investment.”

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Whether you see it as a danger or an opportunity, the current bear market won’t last. Here’s what to do before the tide reverses direction.

Everything Is on Sale — Be Grateful and Buy

Omer Reiner, a real estate professional with a wealth of investing experience, is the president of Florida Cash Home Buyers.

Instead of stressing about how much value you’ve lost from the shares you already own, he wants you to think about how much less you’ll pay for the shares that you have yet to buy.

“A bear market is when the stock market goes on sale,” Reiner said. “Just like with most sales, you should increase your spending in order to take advantage of the savings.”

If you bought during the bull market, every dollar you invest now will bring down your portfolio’s average share price. The instinct might be to pull back, but the smart move is to do the opposite and go all in.

“In other words, you should be investing more money than you normally do during a bear market,” Reiner said.

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If You Do Buy the Dip, Be Careful About It

Reiner understands that buying when prices are falling “may seem counterintuitive.” The trick is to assume that the market still has farther to drop. That calls for incremental investing.

“Don’t invest all your capital at once,” Reiner said. “Instead, spread it out and invest a small portion every week.”

He also suggests sticking with household names, as downturns have a way of weeding out less-established companies.

“Invest more heavily in blue-chip names like Google, Apple or Microsoft as opposed to younger companies,” Reiner said.

Keep in mind that all of this presumes a long recovery window. It’s hard to imagine that any competent financial professional would advise someone nearing retirement to go all in on stocks while the market is on the way down.

“Be prepared that you might not get your money back for at least a few months,” Reiner said. “More likely, a few years.”

It’s All About Dollar-Cost Averaging and Asset Allocation

For Dave Anderson, financial planner and founder of the retirement planning firm BMOGAM Viewpoints, the onset of a bear market is not the time to start planning for a downturn. Instead, both ups and downs should be baked into your long-term strategy. After all, both are inevitable and you can’t predict either.

“You should always be saving and investing,” Anderson said, “and, because of this, you will be investing in bull and bear markets.”

For Anderson, successful long-term strategies all share two common ingredients: asset allocation and dollar-cost averaging.

“Using these two methods will lower your risk and set you up for healthy returns over a long period of time,” Anderson said. “Smart asset allocation means that you should invest in many different asset classes because you never know what is going to perform the best. You should spread your money not only across the tech, commodities, media and banking sectors, but also across real estate, physical precious metals and a little bit in riskier assets like crypto — but not much.”

Ideally, you’d be able to predict the downturn’s bottom, buy at the lowest possible price and then sell the moment the stock peaks. Good luck with that.

“No one, not Warren Buffett nor any of the greatest investors, can pick the absolute bottom or top of a market,” Anderson said.

That’s where dollar-cost averaging comes in.

“The best you can do is to always be investing,” Anderson said. “This way you are buying more when prices are super low and less when prices are super high.”

It’s not a bear market strategy, it’s a strategy to make bear markets less destructive.

“Dollar-cost averaging, consistently over long periods of time, has made many investors rich,” Anderson said. “It’s just boring and no one wants to stick with it.”

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.

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