Find Property:

What To Do In A Bear Market

What to do in a bear market? Be a tinman.

That’s what you should do in a market downturn, like the one we’re seeing right now.  You may have heard recently that we have officially entered a “bear market”.

Wait back up, be a tinman?  That’s not the name of the song.  Isn’t it be a lion?

Lion, and downturns, and bear markets, oh my!  What does it all mean?!

Don’t worry reader, let’s discuss.  

And The Stocks Are Going Down, Going Down, Go-ing Down!

Now most of this blog is focused on personal finance and helping you the reader implement some simple strategies and solutions to effectively save money, grow wealth, and put your money to work for you.

But what to do in a market downturn?  When things aren’t so rosy.  When stocks aren’t just going up, up, up like a hot air balloon in a cyclone.

what to do in a bear market

What is happening?!

Well, the stock market is enjoying a bear market these days.  That means the market is down at least 20% from its recent (all time) highs.

That’s bad right?!  Should I sell my stocks, cash out, and buy as many oversized lollipops as possible???

No, the munchkins may disagree, but you shouldn’t do that.

This is a natural part of the ebb and flow of the stock market.  How many times have I said on this blog that stocks go up, and go down?  Did you thinking I was LYING?

That’s right reader, stocks do indeed go down.

So why are we investing in these stupid things that are going down right now?  What about index funds that have a blah-de-blah-de-blah 10% annual average return?

That’s the thing, it’s an average return.

When we’ve talked about the simple path to wealth index fund investing strategy before, we’ve gone over the average return you can expect to get back from an index fund each year.  That average return often lands in discussion around ~10%.

That means that some years the stock market is going to go up 14%, and some years it will go down 6%- and on average, in the long run, you’re going to see something close to ~10%.

And there are times where we cycle through a bear market.  It’s a market downturn.

But this kind of thing is rare right?  Like once in my lifetime maybe?

Nope, it happens about every 4.5 years.

Oh!  So what gives?  What’s the big deal then?  If this happens so often, why do people always freak out when it does?

Well, it’s not about the event itself- it’s all about what you do in a market downturn.

How Do You Solve A Problem Like A Bear Market?

The one thing you don’t want to do in a market downturn is be a scarecrow.

A scarecrow has no brain!  A scarecrow is liable to see their portfolio of stocks shrink day after day and decide to sell those stocks before it goes any lower.

Silly scarecrow.  They forget that the market historically always goes back up.

Speaking of what not to be in a market downturn, you DEFINITELY don’t want to be a cowardly lion.  

A cowardly lion has no courage at all, right?  So when the stock market goes into a bear market, the lion might get scared of what’s going to happen next, and sell all their stocks and index funds.

Scared of what’s going to happen next?  Why?

We just noted that historically, the market.  Always.  Goes.  Back.  Up.

When you think of it that way, there’s a very easy way to use your brain, and not be scared.

Do nothing.

That’s right, when the market goes down, even into a bear market.  Do nothing at all.

If you must do something- if you have that itch you can’t quite control, and you have the means to do this-

Then buy more index funds.

It’s important that when the market goes south, you be a tinman.  Strong, resolute, and heartless in terms of how much self-control you’re going to exert on yourself.

Do nothing.  Watch your stocks go down.  And then watch them go back up again.

Keep investing and keep adding to the pile.  Be a tinman.

Finale Thoughts

When is the market going to recover?

I don’t know, and the truth is, nobody does.  

There are a lot of folks on TV, and on the radio, and in magazines, out there that think or say they do they know- but honestly, their guess is likely as good as yours.

So what do we do in the face of such uncertainty?  Do nothing (threw one more in for good measure).

Our strategy is a long term one, so that we can build ourselves the future we envision for the rest of our lives.

Believe it or not, this is all part of the plan.  Seriously!

We knew this was going to happen.  Because we’re so much smarter than that ignoramus scarecrow.

The important thing is letting the market run its course, and sticking to our simple strategy.

And hey, it probably doesn’t hurt to have a nice emergency fund built up for times like this too.  We’ll take the added peace of mind that offers always.

Yes the market is on a downturn these days, but if history is any indicator, it finds its way home.

*click*, *click*, *click* !

Post a Comment