Bear Market



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5 Ways to Survive a Bear Market!

The Bear Market can cause peak anxiety and stress. Read on to find out the 5 ways you can benefit from this!

The bear market is most definitely upon us. Unless you have been living under a rock, or have the pleasure of consoling yourself with a ten-figure net worth, most people have felt the hit. Regardless, this blog will provide a brief overview of why we are currently in a bear market and most importantly, how you can overcome it.

Bear Market Conditions

Whilst we have yet to reach the halfway point of 2022, so much has already happened. For instance, would you have believed someone had they told you on the 1st of January that inflation would soar to multi-decade high levels, or that Russian tensions with Ukraine would escalate to a fully-fledged war? It’s hard to conceive. Nevertheless, it’s happened and rising levels of inflation have coincided with the cost of living reaching untenable levels. Meanwhile, as a method of combating this, the Fed and Bank of England have raised interest rates. Consequently, this has ground a halt to monetary stimulus all the while trying to alleviate the current strain on the economy.

The immediate effect of this hawkish approach from the Fed has seen a surge in the US dollar. Whilst this is pleasing for the Fed in terms of fighting inflation, the ramifications for risk-on assets such as Stocks and Crypto have been catastrophic. In addition, the Nasdaq has had its worst start to a year since 2008, while blue-chip stocks have seen corrections of over 10-20%. Moreover, considering Bitcoin is regarded as one of the most speculative and therefore riskiest asset to own, it has remained relatively strong in recent months. Having said that, the burden of an impending recession has been all-too much, and in the last week, it has seen retracements down to $30,000. In summary, the current outlook of the global economy is rather bleak. But, fear, uncertainty, and volatility present opportunities, which will be considered next.

How To Survive The Bear Market

1. Cash Is King

When inflation is soaring to multi-decade high levels, it causes currency debasement well beyond 10%. As such, cash doesn’t sound like it should be king. Instead, investors like to move their cash position into riskier plays, in the hope of generating returns higher than the level it’s currently debasing. However, the height of a bear market is extremely risk-off, which as alluded to earlier, makes large cash positions more favourable.

2. Identify Opportunities in the Market

Just as bull markets don’t last forever, neither do bear markets. Once you understand the credit-based system we live in, you quickly realise that the whole system is revolved around debt. The only way this can be solved in the long run is through more monetary stimulus. Therefore, asset inflation will continue to rise. It could be beneficial to make use of times of extreme volatility to identify entry opportunities into hard sound assets that will generate returns over the long run.

3. Distract Yourself From the Noise

Bear markets create lots of hysteria and panic, which can be unnerving to the everyday investor, After all, we are not robots. If we were, investing would be a lot easier because you would make decisions solely based on rationale and not emotion. As a result, take this time to distract yourself from all the noise.

4. Take the Time to Learn

Consider taking the time to learn in a bear market. This can be learning from previous mistakes or just trying to strengthen your knowledge of the economy, investments, and emerging technology. This will help you prioritise what is most important to yourself. In reflection, you may look back at this time as a valuable learning experience.

5. Have a Long-Term Outlook

The shorter the time horizon, the more risk you are taking. Bear markets are unpredictable in terms of their duration and drawdowns and so you should consider looking at a longer-term perspective. Similar to points 2 and 4, a longer-term outlook will help you identify huge opportunities in corrective markets. A bear market ultimately offers a breath of fresh air and an overall reset, which can be lucrative for the long-term investor that wants to take advantage of markets on sale.

If you found this blog interesting and would like to learn more, check out one of our other related blogs: 5 Common Mistakes Made by Investors

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