How to Survive a Bear Market

By | September 18, 2022
Bear Market

Bear Market

Are we in a Bear Market yet, Recession?

No investor looks forward to a bear market, but they are a part of the market cycle. So if you plan to be a long term investor in the stock market, it is better to plan how to survive the bear markets that you will encounter than to think you can avoid them. Here are some tips to get you through a bear market cycle with minimal losses.

Now, always remember that there are many things you can do to hedge your positions like buying and selling stock options, buying inverse ETF’s etc however for most investors, dollar cost averaging will be a safer play if you have other sources of income.

The most important point to remember is: don’t give in to the temptation to sell low thinking that you will cut your losses. More often than not, this results in a permanent loss rather than the temporary loss on paper that a bear market often represents. Unless you desperately need the cash, its usually better to leave your stocks alone and wait until the market rebounds.

Instead, if you have the resources, consider the bear market to be a buying opportunity. If your strategy is long term, the bear market may prove to be a good time to invest in stocks that are down because of the overall market and not because of poor management practices. Of course, you will need to do the research so that you can tell the difference. But a bear market is good time to add stocks to your portfolio that you may not have otherwise considered when their prices were higher.

When considering buying stocks at their low points, it is important not to get greedy and confuse speculation with investment. A bear market is not a good time to purchase risky stocks thinking that you can make back your losses by having a big win when the market turns around. If the bear market persists longer than you expect it to, a risky stock is more likely to fall even further or collapse entirely if its company goes out of business as a result of insufficient cash reserves.

$VOO is one of my favorite market ETFs to buy, in a bear market this will decline less than individual stocks and still provide plenty of upside.

A better strategy when buying stocks in a bear market is to identify the companies which have long term performance histories and sufficient cash reserves to ride out a prolonged bear market if a worst case scenario happens. You will be better off investing in companies that are financially robust enough to withstand a long market contraction.

Also look for industries that are relatively recession proof, like food, health care, recycle and waste management. No matter what the market is doing, people continue need to eat and dispose of their waste. Health care is a necessity rather than a luxury. And recycling becomes a growth industry as consumer discretionary spending declines.

Bear Markets as a Dividend Investor

Invest in Dividends

Invest in Dividend Stocks

One of my favorite ways to invest is to buy Dividend Paying stocks, this is an excellent way to generate true passive income while markets go up and down, being a dividend investor also provides excellent tax breaks since dividends are not taxed the same way that selling your shares are, this also allows you to wait and have a long term view of the market.

REITS also provide an excellent hedge against the markets since they pay investors a larger amount of their profits in dividends, on top of that, you will also get price appreciation of your shares once the market recovers.

Here are my top 10 dividends stocks to fight this bear market:

  1. 3M 5% dividend stock
  2. Medical Properties 8%  dividend stock
  3. Physicians Realty 5% dividend stock
  4. Comcast 3% dividend stock
  5. JP Morgan Chase 3% dividend stock
  6. Ventas 4% dividend stock
  7. Realty Income 4% dividend stock
  8. Intel 5% dividend stock
  9. Verizon 6% dividend stock
  10. BP 4% dividend stock

The key to surviving a bear market is simple, first make sure you are not highly leveraged, debt can be a great tool but also it’s risky, live below your means, always find deals and invest any extra cash that you have in assets, which are stocks, REITS, ETF’s and Cryptocurrency, if the bear market continues dollar cost average and continue to buy at lower prices, once the market recovers you will be left with a lot of shares of amazing companies and crypto projects which will allow you to have tremendous wealth.