New investors are always fearful of bear markets and usually end up with suicidal thoughts when they discover their “hot stocks” have plummeted. More bearish days are coming our way, but there are a few ways you can protect yourself from losing so much in a bearish market.
What is your investing strategy? Are you a Swing Trader, Day Trader or Buy-and-Hold Investor? If you actively trade, you cannot use the same strategy on bearish markets as you may do on bullish markets. Study chart trends and watch for resistance and support levels. Learn more about your investing style, don’t swing by what others are suggesting just because it’s a “hot stock” and they made an impressive profit.
What is your Risk-Tolerance?
Though you should have gotten this figured out before you started investing, determine how much your willing to lose. Perhaps you should balance your portfolio: create a stock/bond ratio or consider placing your funds in a managed fund. Keep in mind of the fees that are involved with (any) managed portfolios, yet this may save you the peace of mind when bearish markets come along. Growth may also be slower but look for consistency.
There are many investors out there who love to show you how much they profited on bull markets, but few investors show you how much they have lost altogether. May I encourage you not be easily influenced on what appears to look good. When you buy or sell, you are doing it for some kind of gain and at the end of the day, it’s your money on the line. Be wise and educate yourself. There are also many books that provide resourceful education on balanced portfolios and proper investing strategies to give you the best return possible in bull and bear markets. Read my recent book review here.
We cannot prevent bearish markets, we do have the power to manage our emotions. Considering setting a stop-loss, change your investing strategy or properly educate yourself before investing in the stock market. Plan, prepare and protect your portfolio.
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