Users browsing this forum: Bear Market strategies, if any Have a question about your personal investments? No matter how simple or complex, you can ask it here. For those of you who have lived through the last two Bear Markets, do you know what worked in your portfolios? In the crash of , I did not have any investments, so I was not affected. In , I had very little in K so really that did not bother. So in short, I have only seen the market go up and up when I have made significant investments.

Now that we sort of see a prospect of either a correction or a down turn, I was wondering if there any ways to prepare for it. So in these types of environments, where the rates go up, stocks come down, etc.

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Any other alternatives, except CDs? So it would be great to hear from folks who have lived through the last two to see what worked and what did not work. We all know this may or may not happen but wanted to see if there were any strategies to prepare for it. I have studied in the mid west. So during the storm season, we prepare for them. Whether they come or not, we always prepare. Some of the stuff goes waste, underutilized, waste of time, etc. But boy if they come, you feel glad that you had that thing with you.

So keeping that analogy, how does one prepare for a bear market storm? Please go easy on me as this would be my first bear market so I am just trying to learn. Please resist your temptation to call this Market Timing, etc. I got that one. Because this is only for understanding and research rather than placing trades next morning.

When is the storm season? I picked a stock allocation I can live with through thick or thin. It doesn't need to be changed bull or bear.

Hello great folks of this forum. But in this sense, the market is not like weather - there is no "season" during which you know something is more likely to happen than other times. The bear is going to come without reliable warning and by the time you know it is here, it is too late to take corrective action. So you just have to "be prepared" all the time. The way to be prepared all the time is to always have a stock to bond ratio that you can live with during both the good times and the bad times.

It won't be the best ratio during the good times and it won't be the best ratio during the bad times. But if it is something you can live with during both, you've hit the right number. Link to Asking Portfolio Questions. I would do nothing. The point I am making is that it is important to have some bonds and that it can be a terrible feeling to see your hard-earned money drop in half and maybe your job is lost or at risk at the same time.

Selling out stocks when they fall is locking in those losses forever. Look up "IPS" in the Wiki. It is important to have a plan. Perhaps ideally you would rebalance by selling bonds and buying "worthless" stocks, but not everyone managed to bring themselves to do that. I'm right there with you! I invest in the basics- Total Stock Market Index, Total International Stock Index, Total Bond Index, TIPS, with a modest amount of REIT Index on the side for some spice plus a bit in cash.

When I feel uneasy about risk in the market versus my asset allocation, I increase my bond allocation versus stocks. I don't do this a lot as in market timing, I've done it a few times as I've aged over the years. If you need to take less risk, taking less risk is fine. Your portfolio should pass the sleep test you should be able to sleep well with your asset allocation.

Also realize that if you are very conservative in your AA, you may need to save and invest more to meet your goals. It is not sufficient to simply keep adding to your portfolio, but one should also rebalance from bond funds into equity funds, too, in order to keep one's asset allocation.

BTW, the forum is old enough so that one can find threads from to read for fun, too. This signature message sponsored by sscritic: I just kept buying as I was in the accumulation stage until If you look back,bear markets are nothing more than a wonderful opportunity to buy equities at lower prices. It is expected and should be welcomed.

It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" —Bruce Lee. During a market downturn, it seems appealing to maintain the same rate of accumulations or increase them, if somehow possible of the same allocation plan you committed to in your Investment Policy Statement, so that when the good times inevitably return you reap the benefits.

No tweaking, changing allocations, etc. Long time lurker, first time poster here. I find it almost impossible to believe I can't really predict a bear market coming, but the evidence is that I can't--they never come when I expect them, and they take me by surprise when they do.

What "works" in a bear market is not to be too heavily invested in the market. But since I can't predict bear markets,, the only way to be sure of not being too heavily invested in a bear market is not to be heavily invested, period.

You can't get the "risk premium" without actually taking the risk. Everyone would like to, but everyone would like lots of things they can't have. I chose a course that I hope I can tolerate in a bear market, and I hope I can stay the course if a bear market happens--and "tolerate" the low returns I get in a bull market.

What doesn't work is letting greed tempt you to invest so heavily in stocks that you sell low in a bear market. In , I was starting to relax and wonder if I wasn't too conservatively invested. I definitely was not too conservatively invested. My wife and I found our risk tolerance stretched almost to the breaking point. Because we did not quite exceed our risk tolerance, I say that "our bear market strategy"--which was to have a low stock allocation and stick to it--"worked.

If you are seriously worried about a bear market, then perhaps you are too heavily invested in stocks. Certainly it would be better to lower your stock allocation now rather than in the middle of a crash. But don't kid yourself--even when everyone is commenting on how high the stock market is, you do not know what will happen. If you lower your stock allocation, you should lower it permanently and stick to it. You have to say, and believe, "I don't know what's going to happen.

For the next three years, stocks might have a disastrous crash or they might boom and I might miss out on three years of growth. You have to consider both possibilities and choose the path that will minimize your regret.

Consider both of these possibilities seriously. If you can accept a but not b , then keep your stock allocation. If you can accept b but not a , trim back your stock allocation. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

In all those cases, not doing anything in reaction to what happened turned out to be the best course of action. It was not always intentional, since in I had flubbed a form to get out of equities, but had only checked the box that applied to new contributions. In , I was overly allocated to equities, mostly because of the mania of the 90's, but in all cases once I realized what happened, luckily, I rode it out and that turned out to be what worked best for me in terms of a positive outcome.

I didn't lose any money on investments in I wasn't heavy in tech stocks though , but my investment total dropped because I was spending. I did lose in and Because I was taking out for expenses monthly, my net worth dropped even more.. Invest conservatively, be cautiously nervous and watch spending. I also continued my plan of keeping my stock allocation at only minus my age.

When came around my investment total was back to my retirement number at the decade after taking out for expenses monthly. Taking out for expenses dropped the investments further. I stayed where I was. That loss was fully recovered plus some in , so staying the course continued to work.

Have an investment and spending plan; know my risk tolerance and don't try to beat it; try to shut out the noise realizing that bear markets will come and bull markets always follow. If you succumb to the need to make changes based on what the markets are doing, it suggests you either have the wrong asset allocation or you haven't given up on the idea that you can time the markets.

Our strategy with bear markets: Folks who did that back in lost a lot, and then, worse, they missed out on the amazing recovery. Sure, no one knew there would be such a great recovery; it certainly didn't feel like an historic bull market was about to occur. It "felt" more like the end of life as we know it okay, an exaggeration, but it was not a good feeling. Not everyone was able to "rebalance", taking advantage of those nice low stock prices.

But folks who just sat still did quite okay, too. A take-away lesson is to have enough for a couple of years of expenses if retired or if job loss is a reasonably possibility in a serious economic downturn , so that one does NOT have to "sell low" to meet basic expenses. We cut back on some discretionary "extravagances" mostly travel back then, even though we weren't close to retirement and job was secure.

There was indeed a feeling "how bad will this get", and it just seemed prudent. Panic just enough so you do nothing. This is good to avoid compounding losses by not rebalancing on the way down. Rebalance near the bottom. This was dumb luck. Enjoy the ride back up. By April 1, I was back to where I had been on April 1, I think the important lesson is not changing my AA until things had stabilized.

Stay the course, stick with you plan. By the way, I retired unexpectedly in the midst of all this, on October 31, My early retirement offer was good enough that I did not have to tap savings for a while, so I let the investments ride according to the previous plan.

You can get what you want, or you can just get old. Ever since then it's just never sell equities in a bear market.

Never sell bonds to rebalance into equities either. Don't rebalance at all, just forget about it and let the bear market do what it will do. Our equity allocation has always come back to "normal" without me buying more stocks on the way down and then selling them off again on the way back up.

Also, if the market never recovers in our lifetimes then us being stuck in a lower stock allocation will be a good thing. One exception, when I did have new money to contribute I felt it's OK to direct that to equities to push our AA back toward normal. It did that in but not for a very long time before that. Note also, that this usually means you only sell stocks near historic highs. We have found this do-nothing approach is virtually painless to execute.

That is true in bull or bear or whatever. It will do fine on its own. Those market crashes are just bumps in the road. If you hover you will be tempted to sell when you shouldn't or do other harmful tinkering. How will you know it is a bear market? If you dont know these things, stick with your plan. Haven't been in a bear market yet just started investing 2 years ago or so , but I will just keep buying stock index funds. Our family owned " Larimore's Diner " in Foxboro, Mass.

I was 5 years old. When the depression hit, we lost the Diner and moved into my grandfather's home in Miami. My grandfather was an investment professional on Wall Street, who like so many others, went bankrupt. We were forced to move when he lost his Miami home next door to where I live now. These figures show what the worst bear market was like: You watch in agony as month after month your life savings evaporate before your eyes.

Gloom and doom talk is everywhere. Nearly everyone else is selling. You have no idea when, or if, your portfolio will stop losing money. Your friends and relatives urge you to sell before losing everything. Nearly all financial 'experts', including newspapers, magazines, and radio commentators recommend "sell". You are ridiculed for trying to hold on.

You begin to have self-doubt. Buying stocks is unthinkable. Most stock investors in the 30's sold and never returned to the stock market. Many ended their days with their family in poverty. I remember the "poor farms" on the edge of towns. There were no social security retirement benefits. All ya gotta do is 'buy the dips'. Even didn't last forever. The best is always that strong monetary action will revive the market, and the bear will turn to bull. It's ignored the possibility that we are in , or UK or Japan to whenever.

Perhaps the sign of a real bear will be when boards like these shut down due to lack of interest. So balance is good. Not much else to say. If you are out-of-balance now, consider a planned series of rebalance steps rather than a big change all at once.

So how do you make sure you don't need to sell? Long time horizon, no need for liquidity before that time horizon is up, stable job, large EF in case job ends up not stable as you once thought, and ability to stay the course. The problem comes in when folks are not truly honest with their situation. Too many times you hear: A giant distraction from the business of investing.

Louis Winthorpe III wrote: Easy to say but hard to do. My guess is that people who form their allocation during a bull market run tend to be a bit more aggressive than if they had formulated it during a "correction". So, test out your current allocation.

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Double that percentage and that is about the maximum you should allocate to stocks. Use that and the age in bond guideline to see if your current allocation seems right. In I was working so just stayed the course and in I just retired and moved my substantial k to VG money market TIRA.

I had always had a substantial allocation to a Stable Value Fund in my k and a moderate equity allocation. In , after getting to know the VG fixed income products I bought Total Bond, TIPS and Short Term Index funds as well as a CD ladder. The CD ladder and short term bond funds were a reasonable substitute to the Stable Value Fund I no longer had access to.

I'm one who believes in or near retirement having a safe floor to fund retirement and then take more risk with the excess. With that approach bear markets are not so scary. I'm unlikely to take money from the "safe" floor to rebalance. Any rebalancing will come from other fixed income or not at all. In the accumulation stage having an allocation that meets your risk tolerance and staying the course.

Your contributions and any company match kind of make that somewhat easy. And if you are using a portfolio for income, and this is too much to bear, then you don't have enough money. If you are not using the portfolio for income, then it doesn't matter anyway.

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Too prove this very roughly and fairly easily, just look at the chart for VBINX on Google Finance or something over the last 10 years, since was the worst of these I believe. Last edited by rgs92 on Sun Mar 08, 5: The biggest problem is that because of people think bear markets last 9 months. My wife and I are the same age, and we will probably start withdrawals at age It wasn't designed as a "bear market" strategy, but it did have a calming effect in I have been studying bear markets and the reactions to interest rate increases so even though I am young and don't know first hand this is what I have learned: First of all even the best can miscalculate the reactions for bear markets.

This will protect you from the Fed's nonexistent schedule for interest increase. If you go short now you will miss out on some create returns that long will provide if they don't increase. If you long and they raise interest, you stand to lose the increase of interest X length of the bond. The intermediate may be playing it safe and is kind of like a Nash equilibrium, but it is the conservative play.

For stocks there are many different strategies. Blue chip have a proven record of guarding the most against large drops in relation to more volatile stocks , but also run the risk of not maximizing returns on the way up. Currently, short and mid cap stocks seem to be king as far as returns go. The main thing however, is the markets. I also look for a downside capture ratio of less than 80 preferably 50 , with a upside capture ratio of. This allows you to dampen the downside, but still see good returns on the way up.

For this reason I chose PRBLX. Last edited by younggun on Sun Mar 08, 9: I am new to the fund, etf, and bond trade, but I am eager to learn.

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Eugene Fama, Nobel Laureate: Protect your human capital so you are still employed and can continue investing. So-called "defensive" stocks from stable large-cap companies with solid cash flow and dividends will augment your ability to pick up equities at bargain prices. I am not a financial professional. My posts are only my opinion on the topic. You need to do your own due diligence and consult with a professional when addressing your financial questions.

Stick with the asset allocation that makes you sleep at night. And hope you have the cash to work thru the bad times. Very few people if any can time the market. I exchanged some into Vanguard Wellesley - VWINX - Now, I'm wondering if maybe the Vanguard Balanced Index Fund - VBINX - might be a better middle of the road choice I do like a recent couple of posts on this and another thread about allocating new money differently and have been pondering what that would look like.

But once it's in the mix the overall percentage shifts, so new money becomes old money as soon as it's committed.

Still thinking about what that may mean in actual practice. Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.

No matter what happens, stick to your program. I've said 'Stay the course' a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you. Without debt you can survive unemployment, stock market downturns, and liquidity crises a lot longer. If you have an income coming in, I suspect it's a lot easier to at least 'stay the course' during market downturns. I have no particular strategy otherwise.

What I've done during big stock market drops has been: In ff I again did nothing. I had regular savings to deploy and invested in whatever was below my desired allocation.

In my investing experience or foolhardiness and hindsight bias kicked in, and I actually did something: I rebalanced in February , not because February had any meaning, but because my earnings pattern had gotten me into a pattern of portfolio review and rebalancing only once a year towards the beginning of the year, and that year I happened to be away for January.

As luck would have it, the US stock market nadir was, I think, around March Looking back my unconscious strategy seems to have been a combination of indifference and luck. I hope to be retired by the time the next big bear market rolls around. By that time I'll have a much lower investment in stocks, so maybe I'll do nothing again. Though even after living through several, I think it's hard to predict one's personal response because one's circumstances have probably changed since the last one.

The only bear market strategy I recommend is to do nothing. You're probably safest with that. If you want to take a little risk, you could rebalance, bearing a pun! The only thing to do to prepare for bear markets, as many others have noted, is to be honest with yourself about your risk tolerance when setting your portfolio's ratio of stocks and bonds. Who is online Users browsing this forum: Home Board index All times are UTC No guarantees are made as to the accuracy of the information on this site or the appropriateness of any advice to your particular situation.