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HOW TO SURVIVE (Inevitable) Bear Markets


HOW TO SURVIVE (Inevitable) Bear Markets                                                                                                   Facts You Need to Know About Bear Markets.                                                                                                                 Do you know why bear markets happen?                                                                                                                        Or what you should do during them?

The post-2009 bull market was the longest one in U.S. history (by one definition). This amazing run started in March 2009 and lasted well over 3,600 days. Of course, it's impossible to predict exactly how a bear market will evolve. We do know that they are inevitable, and that they're a natural part of the market cycle. Whether or not you've been an investor during a bear market in the past, the more you know about them and how people behave during them, the better prepared you'll be to successfully endure them.

BULL MARKET: A prolonged period of rising prices, typically gaining 20%+ from the most recent bottom.

BEAR Market: A prolonged period of falling prices, typically losing 20%+ from the most recent top.

 A few Notable Bear Markets:                                                                                                                                   December 1961 to June 1962SP 500 loss 28%. Factor: Cuban Missile Crisis                                                                   January 1952 to October 1974: S&P 500 loss: 48%. Factors: Monetary Policy and Oil Crisis                                     August 1987 to December 1987: S&P 500 loss:34%. Factors: Black Monday and Currency fears                                 March 2000 to October 2002: S&P 500 loss: 49%. Factors: Dot-Com Bust                                                             October 2007 to March 2009: S&P 500 loss: 57%. Factors: Housing Market Collapse

 Things Everyone Should Know About Bear Markets

  • There have been about 25 bear markets since 1928
  •  The S&P gained at least 32% in the year following the last three bear markets in the US
  • Bear markets are the natural response to bull markets that ran out of steam.
  • Just about anything can cause a correction and a bear market from evolving investors psychology to global events.
  • Statistically, bear markets happen about every 3.5 years.
  • On average, bear markets last about 15 months!
  • Remember, all bear markets eventually pass!

 FINANCIAL LESSON: Bear Markets Are Inevitable. Here's How to Keep Your Cool.

Bear markets come and go. They are a natural part of the market cycle. But we never know when they'll happen or what exactly will trigger them. Stay tuned for a future email where I'll catalogue some of the reasons behind the last four bear markets. While we can't predict when or why bear markets happen, what we do know is that bear markets commonly make people emotional and irrational. They can even breed a crowd mentality that causes paranoia and panic.

Want my advice?                                                                                                                            Stop watching what others are doing. Focus on your own needs, portfolio, and risk tolerance. It's nearly impossible to know what other investors are thinking and doing in real time, just like it's impossible to know what the "bottom" is in a bear market. So, try to keep a level head and long-term view. And try to stay realistic. Remember, all bear markets eventually pass! You'll never get to enjoy a market upswing if you get out too soon. Also, don't forget that I'm here to help. Give my office a call at 385-393-4775 or shoot me an email at jim@oaktreeia.com.