Investment Strategies In A Bear Market

As a Bear Market is the opposite of a Bull market it is reasonable to assume that there exact starting point is just as hard to spot. As recent events have shown. Bear marketing follow immediately after a period of often unprecedented market peeks. The end to boom and bust has been declared. Optimism is all around. You’ve really never had it so good, etc. Sound familiar?

Things to look out for to avoid being caught on the horns of a Bull Market:-

Debt levels are at all time high as people borrow against the expectation that shares and all assets will continue to climb to new heights. This impacts not only individuals but companies, banks and Governments themselves. Now, that really does sound familiar!

Excessive speculation is rampant not only in the stock markets but in housing (witness the charge to buy-to-let of the last few years) and the banks themselves relax perfectly reasonable lending rules as they chase more margin

Governments begin to demand a slice of the action through higher taxes on enterprise or increased regulation.

Buy to hold for the long term becomes the cry. Stock markets are a long term investment. Stick around long enough and even if the market turns against you, you will be OK in the long run. Not particularly sound advice if the company you are holding shares in goes bust or is bought for a song by a rival.

This all sounds too familiar now but all the signs were there before the sub-prime loans in the US blew up in the reckless bankers faces.

So, look out for these signs in the future and remember recent events. Remove the emotion and be prepared to admit you were perhaps wrong. Better to get out with something that hang on to the bitter end.

In a Bear market remember cash is king. But there are still areas worthy of investment. So called ‘defensive stocks’. Shares in companies that provide goods and services that are needed no matter what such as food, energy, utilities and health care.

Updated: October 14, 2011 by admin