1 Bear Market Investing Strategies

Bear markets are worrisome indeed. But one need not get unduly perturbed. When the market is down, ‘buy’ is the strategy to be practiced. Watch out for those companies that are selling at a lower price than usual. This is generally referred to as averaging down. This could be a good equities investment in the long term. 

It has been observed that when there is a lot of optimism in the market, it results in the welling up of buying by investors and then this bull market paves way for the entry of the bear market. The intermittent stage is when the cleverest of investors manages to steer clear of the stock market plunge. But the rest are tossed about in the oncoming gush of the bear market waters and then they feel that they are going to drown. So they, in totality, get out of the market while they are in the midst of this bear market. In most cases, this is the wrong move as they incur more losses on their investments. They should actually wait for the stock market to recover / gain from the upside in the succeeding bull market. Thus when the market is under-valued, it is quite difficult to understand when to again invest in it. Similarly when the market is over-valued, selling out is tricky.

History has seen that investors who do not part with their stocks when the bear market is ongoing stand to gain more on their investments when it recovers than investors who wait for some period after the market rally to reinvest in it.

The bear market is feared so much that some investors shy to ever purchase stocks thereon. When recovery is seen, they tend to view it with skepticism; thinking it could be temporary, which also could well be true. These investors then wait until the time when the market is so full of talks of stocks yielding handsome profits that their past losses fade out as a paled nightmare and they reinvest well into the rally. At such a maximum-risk-time, the stocks tend to be very high-priced and the returns will mostly fetch extremely less upside as compared to the times when the market sentiment is quite weak.

With all the complications involved with investments during the bear market, it is very necessary to understand what exactly happens herein: The stock market sits low for an exceedingly long period of time on account of a variety of factors; namely, when there is a decline in the profits of corporations; when there is a correction of over-valuation, etc. The jittery investors sell their stocks in this scenario and hence the price tumbles. This fear is transmitted to other investors as well and they too sell their stocks. Thus starts the vicious circle. And before the stocks lose value, selling is advisable. For long term investments, buying into the bear market is recommended.

The best stocks to buy would be those who look to offer potential profits in the long run, for, say, the next ten to twenty years.

Author Bio:

Liza Dey is a financial advisor in a leading stock market company in Canada and she has immense interest in writing about latest trends in the financial market. She publishes her market forecasts and investment suggestions often through the internet. Writing guest posts and articles is one of her passions so as to create awareness in investors all around the globe. You can visit http://www.profitconfidential.com/ to read about her recent market forecasts and helpful financial investment suggestions.