Strategies For a Bear Market
A bear market condition can bring about a lot of difficulty for a newbie investor who is only comfortable investing in the bull market. This is why it is very important to be able to change up on strategies if suddenly presented with a bear market condition such as right now because of the coronavirus outbreak all over the world.
In this article, we are going to discuss some of the most powerful strategies for sustaining a bear market. Let’s get started.
Start Investing in Extremely Short Term Bond ETFs
This is one of the first things that investors should start doing in a bear market condition. They should immediately start focusing on exchange-traded funds aka ETFs which invest in only high-quality, low-interest-rate sensitive bonds. These funds will always end up earning you a very modest yield. Therefore as an investor will be able to keep liquid. So that you can put your money back to work quite immediately as soon as the bear market. Shifting your focus to short-term bonds is a very good strategy because long-term bond ETFs end up incurring the greater risk of higher interest rates.
You Can Start Adding International Stocks
Investors can start preparing themselves for a bear market by keenly looking for opportunities in some of the majorly weakened areas of the stock market such as international equities. This is a really good move because the outperformance of U.S. stocks during the entire past decade is very much unlikely to continue moving forward.
Start to Rebalance Your Investment Portfolio
A bear market is a good situation to consider rebalancing your existing investment portfolio. This is because some sectors tend to end up typically perform better during a bear market. Therefore, if you happen to balance your portfolio with a lineup of funds that is more on the defensive side. Then it could be of a major help during a rocky market situation. Generally, it has always been observed that consumer staples, energy, and utility sectors happen to suffer less of a negative impact due to their needs are consistent throughout. However, you need to keep your enthusiasm in check because the returns from these sectors may not be as high when compared to the technology sector in a bull market.
Therefore, the ultimate best way to navigate a bear market is to plan when things are completely fine. You shouldn’t be waiting until the bear market has already come and is knocking on your door. Always plan for the long-term.
Adding Fixed Income Assets Help
This is another very good strategy when it comes to tackling a bear market. It all simply depends on how much of risk in terms of volatility you are willing to take on. You can be significantly benefitted by adding fixed income. Such as bonds and Treasurys because they can essentially lower the amount of risk in a retirement portfolio. It is one of the best options that you can opt for during a bear market situation.
This brings us to the end of our discussion on some of the most powerful strategies for sustaining a bear market. Now, you can let us know some of your personal strategies to do the same as well.