INVESTING DURING BEAR MARKETS
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Successful investing in bear markets can involve many different
strategies. Some investors try to secure their assets in less volatile
securities such as fixed-income bonds or money market securities. Others wait
for the downward trend of prices to subside.
When it does, they begin buying. Still others seek to take
advantage of the falling prices. When the market goes down, portfolios with a
greater percentage of bonds and cash fare well because their returns are fixed.
Many financial advisors emphasize the value of fixed income and cash equivalent
investments during market downturns.
Another strategy is to simply wait for the downward prices to
Investors who wish to remain invested in stocks
may seek out companies in industries that perform well in both bull and bear
markets—shares in these companies are called defensive stocks.
The food industry, utilities, debt
collection, and telecommunications are popular defensive stocks. However, as
with any investment choice, there is no guarantee that a defensive stock will
perform well during any market period.
Finally, some investors attempt to exploit profits from the
downward price movements. One method is to sell at the beginning of a downward
turn, when prices are still high. Proponents of this strategy wait for prices to
bottom out. However, as simple as it sounds, this process involves timing the
market—a task that no mere mortal has demonstrated he or she can do
Another, more complicated way to attempt to profit
from falling prices is called selling short.
To learn about this investment strategy,
review the appropriate tutorial available in the Investment Strategies
Now that you have a basic idea of what bull and bear
markets are, it's time for some concluding remarks.