Skip to main content

3 Ways to Survive a Bear Market

masterandstudent bullandbear
If you were hiking in the mountains and stopped in a small river for a drink only to look up and see a bear charging at you, what would you do? Our instinctual reaction in a life-threatening situation, such as being charged by a bear, is to run. But wilderness experts will tell you that instead of running from a bear, you should curl into a small ball.

The moral of the story is that you can’t outrun a bear. And the same is true of metaphoric bears — a bear market, for example.

Anyone who has invested in the past decade, and especially in the past five years, has seen what finance people call a "bear market". What is a bear market? In the most basic terms, it is exactly what it sounds like: a confluence of unfortunate factors that make the stock market a terrible, scary place to be, especially for inexperienced investors.

Our instinctual response to a bear markets is the same as our reaction to a live bear — we want to run. We want to scramble and get out as soon as possible to protect our investments. The thing about a bear market, though, is that it is a natural period of decline. Inevitably, after a period of large gains, the market will sink. Here are three ways to handle a bear market and come out with all your limbs intact:

1. Don’t run. Just as with real bears, trying to run away from a bear market by selling out and transferring your assets into a cash market will generally yield worse results than just staying put. In fact, by trying to run, you only lock in your losses. Volatility in built into the market system, so you can’t let a bad spell shake your faith. If the market is down, the damage is already done to your investments, so don’t make it worse by jumping ship. Instead, plan for the troughs by taking a long-term approach. If you do this, you’ll be in an optimal position to ride the wave back to a prospering market when it recovers.

2. Take stock. One way to take a long-term approach is to review your asset allocation when the market is down and readjusting the mix based on your risk tolerance. Wise investors will tell you that you should be re-balancing your portfolio at least once a year anyway, regardless of how the market is doing.

3. Be consistent. It’s very important to stay the course, even when the market is down. Typically this means that you should continue to add to your portfolio as you would when the market is up. This strategy is called dollar-cost-averaging — if you have a set amount of money you invest each month, buying more when prices are low and less when prices are high, the average price per share you’ll pay will be less expensive than the standard average share price.

Timing the market is as difficult and futile as running from a bear. So curl up, and wait for the bear to drop you, and you’ll be likely to outperform others who try to run.

By-line:
Alvina Lopez is a freelance writer and blog junkie, who blogs about accredited online colleges. She welcomes your comments at her email Id: alvina.lopez at gmail dot com.

Comments

Post a Comment

Popular posts from this blog

Your Bill Amounts Are Going To Increase From June 1, 2016

Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. Union Finance Minister, Arun Jaitley, in his budget announcements proposed to impose a cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services. The present rate of service tax will be hiked to 15 per cent from June 1, 2016, from 14.5 per cent. Take a look at what gets expensive:



Phone Bills: Your phone bills are going to go up. So, pay a good 15 per cent now on service tax on phone bills.

Restaurant Bills :If you are dining in a restaurant that already has service tax applicable, you are going to pay more on your eating out. Though 0.5 per cent on a single bill may not mean much, frequent diners may end-up paying a lot during the year.

Travelling: You will have to pay more for air travel, as there is a service tax on tour operators and travel agents.

What is Gold ETF - Gold Bees, Reliance Gold,Kotak Gold

What is Gold Bees or Gold ETF?

Gold ETFs are open-ended mutual fund schemes that will invest the money collected from investors in standard gold bullion (0.995 purity). The investors' holding will be denoted in units, which will be listed on a stock exchange.They provide returns that would closely track the returns from physical gold in the spot market.

An investor can buy and redeem the units either directly from the mutual fund or from the stock exchange.Presently there are many Gold ETFs traded in NSE India. Some of the listed Gold ETFs are GoldBees,Reliance Gold,Kotak Gold,UTI Goldshare



Why choose Gold?
Gold holds its own in any investment evaluation on its strengths as a hedge against inflation, value in the event of political uncertainties and its traditionally negative co-relation with other asset classes such as stocks, fixed income securities and commodities.

The value of goods and services that gold can buy has remained stable unlike currencies that have seen significant…

What is NIFTY BEES - ETF?

NIFTY BEES - is the first ETF (Exchange Traded Fund) in India, which seeks to provide investment returns that closely correspond to the total returns of securities as represented by the S&P CNX Nifty Index. It gives you the most diversified exposure at lowest possible unit size. Approximately value of Nifty bees will be 1/10th value of the prevailing Nifty price.

ETFs are one of the latest financial innovations and any new concept takes time to be known widely. Globally it took more then five to seven years before it could be of any significant size. In India, it was introduced with Rs 21 crore in size , a fraction of the mutual fund industry, it has come far with more than Rs 700 crore in size with six ETFs.




The Nifty BeES also scores over other index funds due to its low tracking error and expense ratio, apart from easier tradeability as it is listed in the NSE. One can also consider doing an SIP in Nifty BeES.

Some of the reasons to invest in Nifty Bees : Investing in Exchange …