The S&P 500 fell to a yearly low of $3,666.00, a 23% drop from its January 2022 high. This confirmed earlier remarks that we had slipped into a bear market and not just your typical bear market given the number of warnings we’ve heard from top market experts, macroeconomists, veteran traders, and investors.
Earlier in the year, American investor and financial commentator Jim Rogers said this would be the worst bear market and recession of his lifetime. Even though it sounded like an exaggeration coming from someone with decades of experience in the financial markets. Recent events seem to be confirming these fears, especially with the hot inflation figures. The US economy is also battling never-ending supply chain issues and a full-blown war between Ukraine and Russia that is rapidly worsening the energy and food crisis back home.
With such a gloomy macro environment, it is unclear when investors can expect a rebound and the return of the bull market, so it’s not an option to stop investing until everything blows over. Millionaires and top traders don’t stop investing during a bear market. They merely change their strategies. This is why we are going to be examining the winning investment strategies that millionaires and billionaires adopt during a bear market.
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Step #1. Restrategize
The first thing you need to do to keep winning in a bear market is to create a winning strategy and stick with it. This generally means making a few tweaks to your investment portfolio, but too many tweaks can hurt your finances in more ways than one. For example, if you sell your investments too often, you could end up with a lot of capital gains, which could hurt your future returns. In addition, the search for high returns could push you into highly volatile speculative assets. So rather than jumping from one strategy to the other, it is best to pick a winning strategy and stick to it.
Here is an example of a simple three-fund portfolio for investors who prefer traditional investment assets:
- 64% total U.S. stock market index funds.
- 16% international stock market index funds
- 20% total bond market index funds.
Investors who prefer cryptocurrencies and other digital assets can simply switch to their highest conviction names. Chasing a new unproven project simply because it offers 300x gains might not be very advisable because of the high volatility in the markets. Before you make drastic changes in your portfolio, you can also ask yourself the following questions:
- What is your investment goal?
- What are you trying to achieve with the changes?
- Do recent market events support these changes?
- What’s your risk tolerance and time horizon?
Stick with your strategy. So it’s a bear market, everything is dipping, and you just want to sell off everything in your portfolio and reinvest when things get better. That would be a terrible decision because you would be selling low and buying back when prices are high, and at the rate the US dollar is inflated, the money you put back in would be worth much less than what you would get for selling your assets. Instead, see this as an opportunity to buy more assets at a discount. Stay the course and patiently wait for when the markets will swing again.
Just as the past bull market ended, it is certain that the bear market will also come to an end. There have been a total of 26 bear markets since 1929, when the S&P dropped to 100 points in the wake of the great depression. Since then, it has increased roughly 40 times, so stick with your preferred strategy and look forward to better times.
Investing automatically will help you avoid checking your portfolio too frequently. You will also be less tempted to make rash decisions like selling off your assets. Investing automatically will help you stay the course and weather the storm more easily. Plus, it is quite convenient and there are many ways you can achieve it. For example, if your employer offers an employer-sponsored retirement plan, you can have them hold something from each paycheck. Just ensure you select your investments carefully if they don’t make a bad pick for you or keep your cash uninvested.
You could also use any of the trusted exchanges and platforms that allow you to auto-invest with dollar cost averaging. We left the best for last. Dollar cost averaging is a simple investment concept that allows you to invest the same amount of money consistently over time, regardless of market conditions. For example, you can decide to invest one thousand dollars per month in bitcoin or any other preferred asset. When prices are low, you buy more. When they are high, you buy less. You buy it regardless. It’s not difficult because you are not trying to time the market.
In one of his interviews, Michael Saylor said that the Microstrategy does something similar to DCA in bitcoin copy trading. This demonstrates how valuable this investment strategy is: it is convenient, consistent, and simple to implement.
What is your preferred investment strategy for surviving a bear market? You just might be saving an inexperienced investor trying to escape the gloomy macro environment.
[This article is a transcription of a video made by Savvy Finance]
[Original video: https://youtu.be/20rEbMOL08E]