I'm sure you have heard this before or Something along these lines but many People say that we should fear the bear Or be afraid of a bear market and Everyone is afraid of the inevitable Bear market and you're going to hear More and more people talking about it as We get into a more extended bull market But you guys really have no reason to Fear this and if you guys do have doubts Or concerns about Bear markets i would highly recommend Looking at the book money master the Game or unshakeable by tony robbins Because it really Eases your nerves and makes you feel Confident about Going through a bear market and not Actually being concerned because it's Really one of the best opportunities out There for an investor so when everyone Is selling stocks in a frenzy you will Be patiently waiting on the sidelines to Scoop up once in a lifetime Opportunities now most people focus on The timing of a bear market and they're Very concerned about when the next bear Market will take place but instead as a Stock market master You will be focusing on capitalizing on The bear market and there are a number Of strategies i recommend and we're Going to discuss these going forward so The first strategy is to pan for gold
And what i mean by this is follow the Value investing principles in a bull Market good value investments are few And far between because as a bull market Becomes overextended there's going to be Less and less value out there because Many of the stocks become overvalued However during a bear market stock Prices across the board are going to Come down in value and you're going to Find opportunities everywhere they're Going to be everywhere that you look so The number one thing i recommend doing In a bear market is to go hunting for Value or to pan for gold in a bear Market The stocks of financially stable Companies go down in price due to the Market sentiment everyone is selling Left and right they're not going to care What they're selling they're going to Sell any stocks they're holding on to And due to that massive supply you're Going to see stock prices come down in Price So in the words of benjamin graham you Want to look for unjustified pessimism And in my opinion A great place to start is with the blue Chip giants so maybe look at the stocks On the dow jones industrial average and Look at what stocks have been hit the Hardest because right now the entire Market or the entire store is on sale
And this is the best time to go hunting For value investments so the number one Thing i'd recommend doing during a bear Market is to go hunting for value and to Pan for gold and look for unjustified Pessimism among the strongest and most Durable blue chip investments The second strategy is to go hunting for Dividends so you can look for great Income investments that are at a bargain Price right now because like we said During a bear market everything is on Sale now again i just want to stress This you don't want to solely rely on The dividend yield as an indicator Because dividends are not guaranteed and At that point you're being dazzled by The dividends and there may be a Restructuring of that dividend right Around the corner So yes in a bear market you may see 20 Dividends but that doesn't mean that That dividend is guaranteed in fact it's Likely going to be changed so you want To look for a good investment a good Value investment in a strong company but You also want to pay attention to those Dividends so you can start looking for High dividends but make sure you Consider the underlying investment Itself and consider whether or not the Company will be able to continue to pay That dividend giving the current market Conditions
So what you want to do is look for a Company with a strong dividend history That has been dragged down due to the Market sentiment and in a bear market Guys you could potentially Buy a dividend stock that will pay back Your entire investment within a decade So imagine that you're in a bear market And you're able to invest in a stock With a 10 dividend yield and within a Decade you've paid back your entire Investment your investment has paid for Itself at that point and you're earning Dividends and at that point you Basically got that investment for free Because the dividends paid you back These are the type of opportunities that You can find in a bear market you're Going to find great dividend investments That are just at a really bargain price You're going to find that everything is Going on sale Now if you're looking for a defensive Approach I would stick to the defensive Industries as they have greater Durability so go back and look at our Discussion on sectors and industries and Refresh yourself on what these defensive Industries are If you're looking for a lower risk Approach i would stick with these Defensive industries because they are More durable
In a bear market they are stronger Investments so the third strategy to Turn a profit in a bear market is to Rotate sectors So as we know defensive industries hold Up better in a bear market as the demand For the goods and services is steady So consider investing in defensive Industries through an etf or look for Some individual stocks of companies in Defensive industries Now if you do have a high tolerance for Risk consider investing in an etf that Tracks a cyclical industry and then be Very patient because as we said Cyclical industries are very affected by The underlying market and during a bear Market the cyclical industries are going To be hit the hardest so if you have a High tolerance for risk this might not Be a bad time to scoop up a broad etf That tracks a cyclical industry that way You're diversified and you're not at Risk of a company going bankrupt Hold a broad position in a cyclical Industry and wait for the markets to Recover and wait for that industry to Come back into favor another thing you Could do and this is a bit riskier but You could look for a stock in a cyclical Industry with a strong balance sheet as There is always a risk for bankruptcy But if you invest in a company with low Debt and a good amount of cash in a
Healthy balance sheet then you could buy A stock in a bear market that's in a Cyclical industry and just wait for the Rally now it may take you years to see That rally and it may be a frustrating Time for you in the meantime But you're going to see stocks of these Cyclical industries get hit the hardest And those are going to be the best Opportunities even though they are Riskier opportunities and many people May not be comfortable with that level Of risk strategy number four for turning A profit in a bear market is to short Sell the losers now this is not Something that i have done myself and uh If you guys are looking into short Selling i would recommend that you guys Spend some more time learning about this But if you are interested in a Speculative form of trading you could Short sell the losers and what you're Going to do is basically Perform fundamental stock analysis but You're going to be looking for the exact Opposite of what you're looking for in a Good investment so rather than looking At a defensive industry with a strong Balance sheet you're going to look for Companies in a cyclical industry that Are burdened with debt you want to look For companies that are not turning a Profit because the thing is if they Couldn't turn a profit in a bull market
How will they fare in a bear market so One of the things you can do Is find the companies that have the Worst balance sheets in cyclical Industries that are not turning a profit And then short sell these stocks because Odds are they're going to be hit the Hardest now this is a form of Speculation and many people are not Comfortable with that level of risk Personally i don't short sell but if i Were to short sell this would be the Only time that i would really do it is During a bear market because it's pretty Easy to tell what companies are not Going to fare too well during that time Strategy number five is dollar cost Average so if you are following a Passive investing strategy like Investing in index funds through dollar Cost averaging just keep on doing that That's one of the best things you can do Because during a bear market you will be Buying shares while they are on sale Lowering your cost basis per share So as we've said before with dollar cost Averaging you're buying shares up high You're buying shares down low and over a Long period of time you're paying the Market average price per share so if You're already following a dollar cost Averaging strategy just keep on doing That or consider investing more heavily In a bear market and moving more money
Into stocks and less into bonds as we Said before if we're following the Principles of benjamin graham you want To be greedy when others are fearful and Fearful when others are greedy so during A bear market people are very afraid of Stocks and they're selling them left and Right and at that point we move into a Period of unjustified pessimism so that Is a great time to be greedy and Scooping up these investments and if you Are heavily invested in bonds you might Want to allocate less money into bonds And more into stocks simply because Stocks in general are undervalued and Then the final strategy i recommend is a Very simple one and that is to do Absolutely nothing One of the best things you can do in a Bear market is to do nothing at all Because the truth is most of the poor Emotional decisions people make with Their investments are during a bear Market it is a very emotional time for People and it's the biggest time that People make very bad decisions A bear market will test your patience But understand that it is very temporary Bear markets are a regular occurrence And historically they have proven to be A lot shorter in duration than bull Markets so the best piece of advice i Can give you when it comes to a bear Market is if you don't know what to do
Just do nothing at all
