How to Invest in a Bear Market and Prosper in a Stock Market Correction
How to invest in a Bear Market is usually not considered by most Independent Investors. Instead, the term “Bear Market” strikes fear into nearly every Independent Investor whether they are in Mutual Funds, have a 401(k), or manage their own Long-Term Portfolio. This is not just because they fear losing money on their investments, but also because it seems as if there is no way to tell if a market is suddenly going to collapse.
For most people, a Bear Market or major Market Correction are a mystery. These bearish markets seem to happen for no reason, and especially when the economy seems to be booming. That is the main reason why Investors are constantly wondering when the next bear will happen. They feel there is no way to know what will trigger a major sell-off. Many blame selling short, believing that those traders drive price down harming the Independent Investor.
Almost no one ever wonders how to invest in a Bear Market. Most Independent Investors believe that a Downtrending or Stock Market Correction is all about losing profits, and hope they end soon so that a Bull Market can bring stock prices back up.
There are 5 Bear Market facts most Independent Investors do not know:
1. Even in a Bear Market, some industries and most of their stocks will be rising in value.
That means that IF an Independent Investor knows how to identify these industries, they can move their portfolio investing over to those industries rather than leaving it to lose 70–80% in a Bear Market. In that manner, they have a method of how to invest in a Bear Market.
2. Diversification will not protect investments during a Bear Market.
Diversification never has and never will protect investments during a Bear Market. When the Stock Market suffers a major Great Bear Market, the economy follows, and all Financial Markets suffer as well. Diversification merely limits the Return on Investment ROI during a Bull Market, and leaves the Fund or Portfolio exposed to major risk during a Bear Market. The reality is that Independent Investors need alternatives to conventional investment practices which were designed 50–60 years ago, and no longer work due to changes in the Market Structure of our automated global marketplace. Using alternatives to conventional investment practices is another method of how to invest in a Bear Market.
3. There are ways to recognize when a Bull Market is nearing the end of its cycle.
All Bull Markets encounter a peak and a trough; however, the fatal mistake most Independent Investors make is believing that a Stock Market cycle is a preset number of years. Each Great Bull Market cycle in the past 130 years has lasted a different length of time. The duration of a Bull Market is NOT a set number of years; that is a myth perpetuated by averaging the Bull Markets to get an approximate number of average years. This average is not helpful at all because the Independent Investor either sells too early or too late, and there are other methods that are far more reliable. Once an Independent Investor is able to recognize when a Bull Market is nearing the end of its cycle, they can instigate methods they have learned regarding how to invest in a Bear Market.
4. Technical Analysis is NOT predictive.
Many Independent Investors scoff at Technical Analysis, because a few gurus in the news try using it to predict the market. No one can predict when an earthquake will occur, a volcano will erupt, or any other natural cataclysmic event, and the same is true of the Stock Market.
However, if an Independent Investor uses Fundamental Analysis in the same way as Technical Analysis, it creates a powerful NEW TOOL. This new tool is far easier and faster to use than relying upon stock recommendations which always get an Investor into a stock late, or Financial Reports that are hard to read and understand.
By using a Graphical Representation of the Fundamentals of a Company, suddenly there is an invaluable visual resource in terms of being able to see the business cycle of a company with its stock price. This information compared to the Volume action of the stock, reveals if giant Institutions are buying or selling the same stock. This is one of the NEW TOOLS now available to Independent Investors, Mutual Fund Investors, and anyone managing their own Retirement Account. Using these new tools, it is possible to learn how to invest in a Bear Market.
5. Simple ways Individual Investors can reduce the impact of a Bear Market.
Independent Investors can learn how to reduce the impact of a Bear Market when they are unable or unwilling to sell stocks, by learning techniques that mitigate risk. The use of Stock Derivatives such as trading Exchange Traded Funds ETFs, Stock Options, Index Options, or Index Futures will offset losses. These are methods Professionals use that are also available to Independent Investors.
Instead of just watching stock values plummet, Independent Investors can take action. By using various trading instruments which earn profits in a Bear Market or Market Correction, they can reduce or offset the loss of a held Stock or Fund which is another side of how to invest in a Bear Market. These new instruments are not hard to learn or use. They provide an alternative to the simple buy-and-hold with a “hope for the best” approach as strategy, which decimates the Independent Investor during a Bear Market.
Investing in the 21st century Stock Market or any Financial Instrument requires that the Independent Investor have more education, knowledge, and tools than previously. This is not the same stock market that existed for your parents or grandparents. The days when an Independent Investor could simply turn over their money to someone with a license to advise them are gone.
Nowadays, those Independent Investors who are able to retire early with ample investment income to do whatever they want in their retirement years are more actively engaged in the decision-making process.
Becoming proactive with personal investments and taking charge of decisions about how to invest in a Bear Market as well a Bull Market will set Independent Investors on a path to financial independence many years ahead of retirement.
Imagine the feeling of knowing that no matter what happens, there are financial resources available to deal with any situation no matter how traumatic or life-changing.
Learn How to Invest in a Bear Market
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