Business

What You Need to do During a Bear Market

No matter how good the market looks like right now, we can never tell a bear’s incoming swipe. Most of the time, we only realize Forex Reviews that the bear had been rearing its head when the worst has come. So, we should know Forex Bonus what we need to do during a bear market.

There’s no real signal that will tell you if a bear market is on its way. You cannot find anything that will definitively indicate that a bear is coming.

A little trip down memory lane: the biggest market crashes in history never really had any catalyst. There had been no two market crashes that are exactly alike. On the flip side, the market crash in 2008 has one thing in common with the Tech Wreck. During both times, the market was extremely overvalued.

This only reinforces the fact that the bear market doesn’t happen when the market is down. Bear markets happen when the market is overvalued.

So, what should we do during a bear market?

Tip 1: Review Your Portfolio

When reviewing your portfolio, you might find out that you have some holding you don’t feel comfortable with. You can also find some trades where you can cash in some profits. During a bear market, do not hesitate to take your profits. The bear cannot take cash outside the market. Drop holdings that are too risky. More or less, those will just add up to your losses if you let the bear take them.

Tip 2: Find Your Risk Tolerance

In addition to reviewing your portfolio, you must know how much risk you can take at present. You may have not been paying attention to your risk tolerance. If so, it’s high time you start determining how much risk you can take. Make sure that your portfolio sports an amount of risk that you can confidently take on. You can try quantifying it using a Risk Score. Then you can quantify your portfolio’s risk level. You can adjust your portfolio if its risk level doesn’t match your risk score.

Tip 3: Have Realistic Expectations

You cannot suddenly become superman and be immune with any of the bear’s bites. Your expectation of how much you can endure risks is just as important as your expectation of how much you can lose. In other words, do not be overconfident even if you have already adjusted your portfolio to your risk tolerance. The better thing to do is to set realistic expectations as to how much you stand to lose. That means that if the market declines 10 percent, the least you can do is expect your portfolio to drop 10 percent, too.

Tip 4: Remember you can’t sell or buy the top or the bottom

There are many tools you can use to give you signals when to buy or sell. However, you cannot possibly know the top or the bottom of the trend—even in a bullish market. It’s much better if you maintain your strategy or find a better tool that can better suit your action plan.

Conclusion

Bear markets are always terrifying, especially for serious investors who have already spent a lot of time and energy—not to mention money—in their investment career. In the end, the bull will always return, and your job is to survive the market until the bear leaves.