3 Strategies for Investing in a Bear Market

3 Strategies for Investing in a Bear Market

June 14, 2022

Investing at a chaotic time like this takes fortitude and planning. And if you can handle it, a falling stock market can be an opportunity for people with long horizons. But are the risks involved worth the gamble? Let's find out.

As investors grow increasingly worried about inflation and higher interest rates, Wall Street has fallen into a bear market.

Making the right moves with your investments and retirement plan is key when the stock market is in free fall like it has been - and it is one of the best ways to build long-term wealth. So how come so few are taking advantage? Firstly, Americans have a lack of confidence when it comes to investing, especially women. A study conducted by the U.S. Bank, found women were less confident and less engaged with managing money compared to men. And with the current market, it's no wonder why. 

Investing is not something that comes easily to everyone. It’s something that you need to work at in order to feel more confident in. When it comes to the stock market, investor confidence is one important factor, the other is having a confident financial advisor. Having an experienced and confident financial advisor will help you to make better decisions as an investor. 

What Investment Advisors Do

Investment advisors, also known as Financial Advisors, make investment decisions on behalf of their customers and adjust portfolios over time to meet predetermined goals.

Without an investment advisor, it’s up to you to decide things like what assets to hold in your 401(k), how much exposure you want to specific industries, and what percentages of your money to invest in which vehicles.

Investment advisors work as professionals within the financial industry by providing guidance to clients in exchange for specific fees. Investment advisors owe a Fiduciary duty to their clients and are required to put their clients’ interests first at all times.

Seeking financial advice can help you prepare for downswings and seek out new opportunities in the markets. Whether you’re feeling bullish or bearish, enlisting the guidance of a Fiduciary financial advisor can help you manage your assets with your best interests in mind.

Looking for ways to become more confident in your investment decisions? Here are 3 ways to acknowledge the fear factor that accompanies investing to help boost your financial faith.

1. Recognize that stock market downturns are normal

A bear market is defined by a broad market index falling by 20% or more from a recent high.Now, the S&P 500 is down around 22% so far in 2022 and bitcoin’s price has fallen more than 60% from its high of $68,000 in November. But stock market crashes are nothing new. In fact, the S&P 500 index has experienced 26 other bear markets since 1928 and, ultimately, it's managed to recover from every single one. Recognizing that market downturns just happen could make the idea of living through one less worrisome.

Increasingly volatile changes in the value of stocks have become more common. The average stock market return is 10% per year, and yes, sometimes, like in 2022, it’s lower, and sometimes it’s higher. It’s a good rule of thumb to stay invested and resist the urge to pull out of the market on down days like these.

2. Conduct Thorough Research of the Company You're Investing In

You want to know that you are buying from the right company so when stock prices momentarily fall, you won't be triggered to move and sell immediately. 

One of the benefits of knowing that you are investing in a great company is that you know the company will be around in the next decade. In other words, always think long-term, not short-term. Beyond knowing a company’s financial metrics, you also want to know that the company is run by trustworthy and good people.

Having more confidence in the company results in more confidence in your investment choices for that company. When you know that you have really found a great company, you want to do your best to buy it on sale. If you do your research and know that you’re buying something that is considered good stock at a low price, you know not to be discouraged as you understand the true value of the company. Therefore, knowing that it will come back up to its non-discounted price eventually will help build confidence moving forward.

3. Have an Experienced Financial Advisor to Guide You

An investment advisor is an expert on matters related to your investment portfolio and could be a vital asset in helping you grow your wealth. Just selecting an investment advisor is not the end of your financial journey. You should be cognizant of your investments at all times and keep asking questions from time to time. 

While Americans seek to gain investing confidence during a bear market and that gap of women is slowly beginning to shrink, it's important to know what to look for in an experienced advisor. All generations of women and predominantly boomer men value an advisor who takes the time to listen to them. When choosing an investment advisor, be sure to explore the following questions and attributes:

  1. Financial planning expertise: what qualifies them as an advisor? 
  2. Fiduciary services: Fiduciaries need to ensure that they are working in the best interest of their client. 
  3. What other services do they provide? While all investment advisers will help guide your investments in the right direction, there are some that may provide additional services such as tax strategies, insurance policies and lifestyle management.
  4. What is their investment approach? This question will help you determine your fit with an advisor.

Final Thoughts

Investing should be easy – just buy low and sell high – but most of us have trouble following that simple advice. Especially in a bear market when tensions are high. There are principles and strategies that may enable you to put together an investment portfolio that reflects your risk tolerance, time horizon, and goals. Understanding these principles and strategies can help you avoid some of the pitfalls that snare some investors.

When it comes to investing, the key is to know what you’re buying and to always stay rational. Don’t let your emotions get the better of you. If you’re like most people, you might be looking to find a financial advisor who has experience and confidence when it comes to suggesting the best investment strategies for you.

How We Can Help

At Agemy Financial Strategies, we value the time we take to get to know you and your situation so we can create a plan specifically tailored to you. Our purpose is to educate our clients - whether that be planning for retirement, legacy planning, wealth management, or just holding your hand when it's time to leap into retirement. 

We want you to know we’re here to help you navigate any questions you have regarding investments, retirement and anything else that comes up during your retirement process. As Fiduciary advisors, it's our duty to act on your behalf in finding the right solutions for your individual wants and needs. 

For more information on our investing, retirement and financial planning services, contact us here today.