10 Activities for the Bear Market

by David Ning · 20 comments

wall street bear market activities

I originally wrote this in October of 2008, at the teeth of the last financial crises when the value of all asset classes seem to be going down and the S&P 500 was half the current value. Now that people are again worried about the market, it’s time to revive this post. Did you panic and sell last time when there didn’t seem to be any hope? Did you finally get back into the market? How did that decision work out financially? The answers to the above questions may help you weather this storm.

Many people will remember September 29, 2008 as a historic day in financial history due to the government’s refusal to bailout financial companies.  It was certainly a day many of us will remember as I saw my twitter account filled with readers talking about their losses throughout the whole day.

Instead of talking about my own losses here, I want to share with you some of the activities that we can all do with this current bear market and uncertain economy.

  1. Add to Your Investments – As the market goes lower and lower, it gets increasingly harder to be bold enough to invest.  Even though it works against our emotions, investing while everyone is frightened is the most efficient way to invest.
  2. Assess Your Risk Tolerance – We all heard about the relationship between time horizon and risk tolerance but a big part of risk tolerance is personal.  On a day that the Dow goes down by 7%, it’s a great time to think about whether this makes you lose sleep at night.  If it does, your asset allocation is too aggressive and it’s time to change it.
  3. Stop Reading the News if It Makes You Sick – There are just too many things important in life.  Tuning out the news might not seem like the best advice but if it makes you happier, then it is the most important advice.
  4. Remind Yourself of What You Have – The stock market going down doesn’t mean the end of the world.  Your family and loved ones are still beside you so cherish them.
  5. Sign Up to Win the MoneyNing Starbucks Contest – If you get a Frappucino, the ice might freeze your brain for some temporary relief.
  6. Examine the Family Emergency Fund – If you still don’t have an emergency fund (or if you keep spending it), don’t you think it’s time to start one?
  7. Concentrate on the Job – My workplace is so lifeless these days as everyone is more worried about their 401ks then their careers.  If you can be the energetic one, you will really stand out and be remembered as a capable employee.
  8. Do Something Nice for Someone Else – Many people are in a bad mood these days.  Make someone happy by doing something for him/her.  It would make you feel happier knowing you are helping others too.
  9. Stop Listening to Your Financial Planner’s New Advice – I am always amazed when the so called experts change the advice they give based on current market conditions.  The right adviser will have already made a plan with us through good AND bad times.  We need a proactive financial planner, not a reactive one.
  10. Stop Complaining – Shh.

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{ 20 comments… read them below or add one }

CD Rates October 1, 2008 at 2:10 pm

I think 3,4,5 are the best ways to cope. We especially all use a brain freeze right now.

But, get out with the family. Play some soccer, basketball, chase each other around.

Get your mind off the turmoil.

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marci October 1, 2008 at 4:49 pm

I guess I’m just naive, but I don’t think I’ve lost anything (real) until/and if/when I cash out – which I’m not doing anytime soon. What’s in there is all on paper, was bought mostly a long long time ago, and it will be back up sooner or later. In other words, I don’t worry about it unless I need to sell it, which I don’t.

I did buy more.

I sleep well at night – diversified and pretty conservative so I can sleep well.
No TV so no news blaring at me :) I just get the weather.

My usual workplace is just me – so I am happy. The rest of the business is not worried as we are in recycling…things tend to do well when the economy turns sour. I’ve been super busy buying junk cars this week – more so than normal. And the boss had a run on buying scrap metal, until that price fell.

I’m ok :) And if I smile a lot, others will catch it too.

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Dividend Growth Investor October 2, 2008 at 11:47 am

I sleep well as well. My dividends are still rolling in. I even got some dividend increases recently.

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Jon Kepler October 6, 2008 at 7:18 pm

Here’s my simple two-part strategy:

1) get new credit lines while you still can
2) cut spending until it approaches zero

Seriously. My plans for a new car and second home are on hold. To be honest, I’m not sure it will really get THAT bad, but if it ever did, the real objective would be outlasting everyone else.

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Flakjacket October 27, 2008 at 5:01 pm

I agree with Marci. Investment losses or gains are not real,”UNTIL” you cash in.The selling frenzy worldwide has seen a lot of chickens go to slaughter. This bear market has all the connotations of “herd mentality”. A lot of fund managers are getting hedge calls, forcing them to sell.
Individual investors with a diversified portfolio(NOT HEDGED),now have the opportunity to get some real bargain basement prices and wait for the bull to return,which it will eventually.I’m buying and going long.

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Jon Kepler October 27, 2008 at 7:11 pm

I understand how viewing losses as “unrealized” can be comforting, but they’re just as good as real if you’re trying to borrow against your assets or prove your net worth (which is to say, very bad).

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marathonrunner February 6, 2009 at 10:20 am

These are great tips while in a bear market. I especially like your first tip; If you are in a bear market it only makes sense to invest because I do believe that you should invest when the market is low and sell when it is high.

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bob March 4, 2010 at 9:13 pm

Great tips here. And still relevant, as the economy and stock market continue to struggle.

Avoiding the news is great advice for anyone who wants to preserve mental health.

In addition to many of those you listed, I use stock market downturns as an opportunity to continue scanning for names that appear to be outperforming the general market, in terms of fundamentals and technicals. It’s a great strategy (hehe — I didn’t invent it, though. It’s been used by a number of the best investors historically.)

But that method worked, helping me spot stocks like JCrew and Green Mountain Coffee Roasters, as they emerged from the bear market last year.

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Guy G. April 17, 2010 at 9:32 am

Hey,
I wanted to make a comment regarding people who are currently retired and living off their investments.
My grandmother for instance, pulls from her investments on a monthly basis for income, and as those investments shrank over the last couple of years, so did her income. So, I think it’s important to mention that tips on budgeting are really important when the economy is good, but especially during a bear market. If you think about those still contributing, if they don’t budget properly, they may have to stop contributing and that’s one of the worst things to do during a bear market.

Talk soon,
Guy

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The Marketeer March 14, 2011 at 12:48 pm

There are actual investment strategies for bear markets, but the general public needs good, long-term investment plans, not a bunch of new strategies to eat up cash. It’s all about who the investor is, and what they need to accomplish their goals.

Cheers. The Marketeer.

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jake November 14, 2012 at 4:41 pm

Surprised you didn’t mention in this article about what to do in a bear market, (at least obvious to me), is simply short the market. Do it by shorting SPY or if in an IRA you can buy SH. Not sure why so many people think they can’t make money in a bear market? It’s just as easy as making money in a bull market. If you just turn the circumstances around mentally. Simple rule. If stocks are going up, go long SPY. If stocks are going down, short SPY. Not sure how more simple it can be. How you determine “going up and going down” depends on your personal time frame. For example; you can look to see if the 20 day moving average crossed above or below the 50 day moving average (medium time frame). If the cross goes downwards, short SPY. If the cross goes upwards, go long SPY. OR, you can use the 200 day moving average. If the SPY is above the 200 day moving average, call it a bull market and go long SPY. If SPY is below the 200 day moving average go short SPY. I also suggest you use a short time frame indicator such as the 20/50 day moving average crossovers as confirmation signals.

At the end of the day, do not fear bear markets or downward movements. Step up to the plate and take a swing at short the market. Heck the big boys do exactly that.

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Jonathan Craig February 2, 2015 at 6:36 pm

“Add To Your Investments” — Love this one! A lesson too few people remember when they start to see red!

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Michael Belk February 11, 2016 at 10:46 am

It is true investors should add to their portfolio, but it is hard for people to invest more money to lose.

That is why the market is considered speculative. Unfortunately, you have to be prepared for losses and ride with with wins.

You need a plan and stick to it.

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David Ning February 11, 2016 at 10:57 am

“You need a plan and stick to it”. Staying the course is indeed one of the most important concepts to get right. Otherwise an investor will lose too much due to him/her reacting to the emotional waves the stock market can cause.

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freebird February 13, 2016 at 11:58 am

My approach involves mean reversion bets so I was buying on the way down. That vintage turned out to be the best I’ve seen in my lifetime, despite the fact that quite a few of them didn’t recover. I guess my only regret was that at that time when the debate was raging between L, U or V, I decided it would be U so my buying pace was slow. When the market blasted back the following spring I had deployed less than 20% of my reserves. So in retrospect it was a huge missed opportunity more than anything else for me.

Today I think only certain segments of the market have that look and feel, such as high debt load energy and mining companies, shipping, and biotechs with little history. We’ll see how those bets work out…

For those who are accumulating long term diversified ETF positions in their 401k and IRA accounts, remember that volatility is your friend because dollar cost averaging means your purchases are skewed towards the lower end of the price range.

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David Ning February 15, 2016 at 7:25 pm

I would add some REITs to that list, as well as banks. Some of those guys have just been hammered recently. Of course, we recommend index funds for just about everybody out there so keep accumulating!

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Paul Dabuco February 16, 2016 at 3:05 am

No. 3 nails it. Sometimes the best way is to ignore things as it happen. Although it is really tempting to watch how your stocks is doing, not doing anything is the best option.

Stock market these days, in general, are falling so it’s really the best time to buy to build up our nest eggs

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David Ning February 16, 2016 at 9:20 am

As John Bogle once said “Don’t just do something. Stand there!”

Stay the course my friends!

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Banking Terms February 17, 2016 at 10:38 pm

My approach involves mean reversion bets so I was buying on the way down.

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Banking Terms February 17, 2016 at 10:41 pm

this is helpful for me

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