Riding Out the Next Bear Market: 7 Strategies

Between June 2007 and March 2009, the S&P 500 stock market index lost approximately half of its value. So did other major market indices, like the Dow 30 and the NASDAQ 100.

The cause of the downturn was a severe economic crisis that pushed the global economy to the brink of depression and wiped out trillions of dollars in wealth. The bear market was brutal, although markets have since recovered to reach new highs.

The late-2000s bear market wasn’t a freak event. In fact, history tells us that something like it — not a mirror image, but something like it — will happen again. And it’s likely to happen soon enough to affect most of the retail investors in the market today.

When it does, will you be prepared? These seven strategies may give you an advantage as you seek to ride out the coming bear market with minimal losses.

  1. Don’t Go All-in on Index Funds

Proponents crow about index funds’ low fees, but their apparent miserliness comes at a cost: limited downside protection when the market turns south. It’s easy to make money when the market goes up, after all; it’s what happens on the other side that makes or breaks reputations.

  1. Work With a Financial Advisor Who’s Well-Versed in Hedging Strategies

Speaking of reputation: During a bear market, it’s more important than ever to work with a seasoned financial advisor who understands the concept of hedging. San Francisco financial adviser Daniella Rand is renowned for crafting bespoke hedging and alternative investment strategies for her clients; she’s among the best, but she’s not the only one capable of guiding you through the next recession.

  1. Reassess Your Portfolio on a Regular Basis

The market is down big. Do you know what your money is doing?

It’s your responsibility — in consultation with your financial advisor — to keep close tabs on how your portfolio is doing. The more you know, the better you’ll be positioned to take proactive steps to limit risk. 

  1. Study the History of Past Downturns for Clues About the Future

Knowledge is power. And while history doesn’t repeat, it does rhyme. Study past bear markets for clues about which market sectors and instruments tend to hold up better, and which tend to underperform the broader market. This is where it pays to work with a history-minded financial advisor, too.

  1. Be Proactive

Fortune favors the bold. Take steps to prepare for the coming bear market before conditions worsen and you’ll be in a much better position to ride out the carnage. 

  1. React Quickly, But Avoid Hasty Decisions

When the market does turn down, resist the urge to make hasty decisions you’ll come to regret. Remember that unrealized losses remain so until you sell. 

  1. Speak to Your Financial Advisor About Alternative Investments

Lastly, consult your financial advisor about suitable alternative investments that may outperform the broader market during downturns. These instruments may not be appropriate for all investors, which is why it’s so important to work with a financial advisor known for crafting bespoke strategies.

Sooner or Later, the Market Will Turn

The downturn is coming; it’s only a matter of “when.” You have an obligation to your family (and your own personal finances) to ensure you’re prepared for the next bear market. Follow these strategies faithfully and you’ll be just that.

You may be interested in:

“What is a bear market?”

“What is a bull market?”

“What is investing?”