rawrrr

I’ve managed to keep my losses to a minimum these past few months but I’m still afraid to look at my portfolio every day… so I can only imagine how investors across the country are feeling.  I’m sure a lot of people are asking “What should I do in this Bear Market?”.  It seems like every day we hope for a turnaround but the Dow continues to dip and crude oil prices creep up.  One coworker asked me “Can I really afford to keep my money in stocks?  I’m thinking of pushing everything into cash”.  It takes everything inside of me to stop from screaming.  DON’T DO THAT!  We’ve all heard the phrase “Buy low, sell high” but why is it so difficult for us to practice that?  It’s one of the fundamental guidelines of investing yet novice investors continue to fall victim against their better judgement.  Why would you wait until your stock plummets, sell at its low, and then miss out on the rebound?  You’ve taken the risk associated with holding a stock and now you should be rewarded with the rebound.  In 1974, during the first nine months of the year, the Dow sank 30%.  But in the month of October, it rebounded a whopping 17%!  For investors who couldn’t stomach the risk and sold in September, they missed out on 17% of gains.  If only they held on one more month.  I was browsing CNN Money and came across this article that I really liked.   Here’s some advice to help you stomach this bear market:

1.  Goals.  If you’re saving up for retirement 10, 20, 30 or even 40 year away, this bear market will barely be a blip on your financials.  Remember that historical data is on your side.  While we’ve seen many rises and falls (Oct 19, 87/Tech Burst/etc) historically, the market has gained.  So stop fretting, your retirement in thirty years is still secure.

2.  Perspective.  It might seem like the end of the world right now but a little perspective is always good.  In the 1970s, GDP was falling but today, it continues to inch ahead.  Our unemployment rate of 5.5% is about half of what it was in the early 1980s.  Inflation was 14% in the early 1980s yet is sitting at around 4% today.   

3.  Reevaluate.  This might be a great time to review your portfolio.  Is your portfolio really as diversified as you want it to be?  Has this bear market exposed any weak aspects of your portfolio?  Many times investors plunge head first into risky investments but once their stocks start to lose money, they realize they can’t stomach the risk.  Two of my friends are in this position right now.  Now that they are losing money, they want to cash in when the opportunity arises and go into some safer investments.   Take this as a (hopefully-not-too-expensive) learning experience. 

What techniques do you use to stomach this bear market?