Ways To Navigate Your Portfolio as S&P Officially Enters Bear Market, According To Experts

silhouette form of bear on financial stock market graph represent stock market crash or down trend investment.
monsitj / Getty Images/iStockphoto

In case you’ve been wondering when the next bear might wander onto Wall Street, wonder no more — the bear market has officially arrived. The only question now is how to deal with it to protect yourself financially.

See: What Is a Bear Market?
Find: What Is a Bull Market?

The U.S. stock market officially entered a bear market on Monday for the first time in two years, CNBC reported, citing a note from S&P Global Dow Jones Indices senior index analyst Howard Silverblatt. The bear appeared after the S&P 500 closed more than 21% below its all-time record close established in January 2022.

According to S&P Global, a bear market happens when the S&P 500 closes 20% below its peak close. The last bear market occurred in early 2020 after the COVID-19 pandemic brought the U.S. economy to a near halt.

What it means for investors is that they need to reconsider their strategies until the bear leaves the room. That doesn’t necessarily mean abandoning your current strategy and replacing it with something else. In fact, almost all stock experts agree that a bear market is no time to go into panic mode. As Wedbush Securities notes on its website, you should still invest with a long-term focus, just like in a bull market.

Building Wealth

Focus on Quality Stocks

Beyond that, Wedbush recommends putting a greater focus on quality stocks than you might in a bull market. Seek out companies that are built for the long-term, with “strong business models and healthy balance sheets.” These stand a better chance of weathering a bear market than a company with short-term growth potential but poor business fundamentals.

Rebalance Your Portfolio

Most experts also stress the importance of rebalancing your portfolio during a bear market. Marta Norton, chief investment officer for the Americas at Morningstar Investment Management, noted in a recent column that you might consider branching out beyond stocks and bonds. She recommends hedge-fund-like strategies that don’t use leverage and have steadier return profiles.

“[These strategies] offer balance to your portfolio without the risk that some parts of fixed-income markets face,” Norton wrote. “You want more consistent, steady performance that’s not driven by the same factors driving fixed income or equities.”

She also recommends looking for buying opportunities as stock prices go down. This is especially true of companies with healthy balance sheets and manageable debt.

“The Warren Buffett maxim should apply: Be greedy when others are fearful, and fearful when others are greedy,” Norton added.

Building Wealth

Don’t Be Eager to Buy the Dip

Just be wary of being too eager to buy the dip — that is, gobble up stocks just because they are cheap. Making a big bet on a single stock as a buy-in-the-dip opportunity “isn’t the best way to proceed,” Nicholas Colas, co-founder of DataTrek Research, told CNBC in a recent interview.

“The No. 1 rule is, lose as little as possible,” Colas said. “That’s the goal … when we get the turn [back to a bull market], you want to have as much money as possible.”

Keep Your Retirement Age in Mind

Finally, keep in mind that your age will also determine your bear-market strategy. Younger investors have more wiggle room to take chances because they have a longer time frame to recover from bad bets. Once you hit age 50, however, you need to dial back the temptation to gamble.

“If you’re 50 years old and plan to retire in 15 years, your best bet may be to keep socking away money in your 401(k) or IRA in the same proportions as you have been,” John Waggoner, an author and personal finance expert, wrote in a column for AARP this week. “The average bear recovers in three-and-a-half years. In the meantime, if you invest regularly, you hope to be buying stock at progressively lower prices.”

Building Wealth

If you are already retired, Waggoner says you should avoid taking withdrawals from your stock funds in a bear market unless you have no other choice.

See: Bear vs. Bull Market
Find: What Retirees Need to Do in a Bear Market

“You won’t have income to cover your losses,” he wrote. “And if your stock fund is down 15% and you withdraw 4%, your account will be down 19%. Withdrawals in a bear market just make things worse.”

More From GOBankingRates

Share this article:

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

Best Bank Accounts of August 2022

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.