The constant drop in the value of stocks in the stock market can scare off any investor. The news has plenty of negative coverage, your portfolio isn't looking great, and the numbers are splattered in vibrant red. This can be concerning for many. But bear markets are not the end of investing in the stock market; rather, they are an opportunity to take advantage of if managed well.
In this post, we will give you suggestions and strategies to survive the bear market with the best and most effective survival techniques.
Understanding Bear Markets
A bear market occurs when the stock market like Nifty 50 or Sensex drops 20% or greater from the peak. An increase beyond this percentage is usually followed by a negative attitude of investors, slow economic growth, or global occurrences.
Bear markets tend to not last which should come as a relief to many. Historically, they have always been succeeded by recoveries and, most of the time, by bull markets.
Why Remain Calm?
Emotionally Investing is Risky Investing. What the quote below exemplifies is that fear can lead to making rash decisions such as selling one’s stocks. This action in itself leads to losses being cemented.
“Be fearful when others are greedy and greedy when others are fearful” - Warren Buffet
How to Invest in Falling Stock Market: 7 Key Tips
1. Keep investment for your long-term goal.
Investment is an approach to achieve your desired goals but it is not a quick process. If the strategy adopted is to build wealth or aim for a later retirement, there exists no need to panic for short-term market corrections.
Pro tip: make sure to review your financial plan but also stick to it.
2. Buy the Dip
Bear markets come with them a ‘discount’. This is true for stocks of companies whose fundamentals show promise like healthy cash flow, low debt, and a good market platform.
Sectors to watch: Blue chip stocks, healthcare, FMCG, and tech.
3. As a Pro Diversify
Putting all one’s money into a single possibility is not wise. It is wise to blend multiple asset classes and even extend geographical reach. This means not being limited to stocks, bonds, gold, and even REITs.
Doing so mitigates risk while also providing one with the ability to endure market volatility.
4. Have Some Cash Reserved (Dry Powder)
Having cash on hand enables one to take advantage of buying opportunities while avoiding selling off other investments at unfavorable prices.
5. Utilise SIPs to Lower Average Cost
SIPs automate your investment efforts. SIPs will help you reduce your average cost in a dropping market by buying more units at a discount.
6. Don't Try to Time the Market
Most people cannot successfully "buy low, sell high," not even the socalled experts. Instead of searching for the market's lowest point, prioritize your time ‘in’ the market.
7. Stay Informed
Stay getting on market developments, earnings releases, as well as other economic indicators. Stay away from the extremes of sensationalism. Remember knowledge is great, but panic is worse.
If you’re in doubt, consulting a SEBI registered advisor for case specific recommendations can be helpful, particularly in turbulent seas.
Conclusion
Bear markets create a sense of panic - while simultaneously serving as an undeniable wealth building window. It is more beneficial to respond with strategy rather than fear. Remember to have confidence in the process, stay patient, and stay focused.
Surviving a bear market and investing in a declining stock market, whether you’re just starting your investment journey or have some experience under your belt, is fundamentally about attitude, self-discipline, and smart decision-making.
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Disclaimer
No buy or sell recommendation is given. No investment advice it is. This blog is only for information purposes. Always discuss with an eligible financial advisor before investing.
