The term “bear market” has been mentioned quite a bit lately considering the recent market volatility. A “bear market” is when stocks experience a decline of 20% or more from a recent peak.
It is understandable for investors to become a little anxious during these times. However, there are some strategies to reduce anxiety.
- Recognize bear markets happen. Bear markets are a normal aspect of equity investing. In fact, there have been 11 bear markets since the mid-1950s. (This doesn’t include a number of near-bear markets when stocks have declined 19%.) Bear markets are as normal as blizzards are during Winter. Not all Winters involve blizzards, but blizzard’s do happen from time-to-time.
- Make sure that a portfolio is designed with a proper perspective in mind. For individual client portfolios, this means portfolios designed around specific client needs, objectives and risk tolerances. No one knows when a bear market will happen. It’s better to be prepared with a brick home rather than a straw house when the big bad wolf begins blowing.
- Bear markets can also pose an excellent buying opportunity. Of the 11 bear markets since the mid-1950s, all subsequent six-month periods resulted in positive double-digit returns. All but one of the 12-month periods experienced high positive double-digit returns.
Bear markets can be uneasy. Please do not hesitate to contact us to review the purpose of your portfolio’s design. Bear markets can also be excellent buying opportunity. Feel free to contact us to determine if there is excess cash that can be shifted to longer term objectives.
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