3 steps to keep your money safe in a bear market | Smart Change: Personal Finance

(Katie Brockman)

Bear markets are one of the most challenging times to be an investor. If you are concerned about your investments, it is normal. Even the most experienced investors can struggle during a downturn, and sticking to your strategy can be difficult when stock prices are falling.

However, the moves you make now could affect your investments for years or even decades. While it’s not easy to invest right now, there are a few things you can do to keep your money as safe as possible.

1. Avoid taking your money out of the market

Do your best to keep your money in the stock market during a downturn, if possible. While that may sound counterintuitive, bear markets can be particularly bad times to sell as stock prices are much lower.

If you initially invested when the market was booming and prices were high, and then you sell when the market is falling and prices are low, you risk losing money. If you decide to reinvest your money later after the market recovers, you may be paying a premium for the same investments you just sold.

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Of course, there are situations where you have no choice but to take your money out of the market. In that case, do your best to withdraw as little money as possible and leave the rest of your investments alone. But if you can swing it, it’s best to avoid touching your investments when the market falls.

2. Hold a Long-Term Outlook

When we are in the midst of a bear market, it is natural to be pessimistic about the future. But the stock market has seen dozens of crashes and bear markets in its history and has a 100% success rate when it comes to recovering.

In other words, every time the market faced a bear market, it eventually recovered.

The key, then, is to try to stay focused on the long term. No one, not even the experts, can say exactly how the market will perform in the coming weeks or months. But over the years it is very likely that it will bounce back. Keeping a long-term outlook can make it easier to weather short periods of volatility.

3. Choose the right investments

In general, a more diversified portfolio increases your chances of surviving a bear market. Most experts recommend owning at least 25 to 30 stocks from different sectors. This way, if one of your two stocks doesn’t make it through this downturn, it won’t sink your entire portfolio.

If you are investing in individual stocks, also check that each is a solid long-term investment. Companies that are generally healthy are more likely to survive recessions, and the more of these stocks you have in your portfolio, the safer your money will be.

Finally, as you approach retirement age, it may be wise to shift your portfolio toward more conservative investments, such as bonds.

Ideally, you should still keep a portion of your portfolio invested in stocks, as this will help your money continue to grow and keep up with inflation. But by investing more conservatively, your savings won’t be hit as hard as stock prices continue to fall.

Keep your money as safe as possible

No one knows for sure what will happen to the market in the short term, but the future is much brighter in the long run. By staying invested, focusing on the long term and choosing the right investments for your situation, you can rest easy knowing that you are prepared for anything.

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