How to Invest During a Bear Market: 6 Tips

If you’re new to the stock market, you’ve probably had a rude awakening: the value of your investments has gone down over the past few months.

Although it can be worrying, don’t panic. A bear market, defined as a stock market decline of 20% or more, occurs from time to time. Stocks typically slide into a bear market when investors fear economic conditions may be slowing, which will dampen corporate earnings growth. Recession fears have increased since earlier this year, when the Federal Reserve signaled it would take interest rate hikes seriously to curb soaring inflation.

The most recent bear market occurred in February 2020, when the coronavirus pandemic shocked the global economy and markets. But the sale was over almost before it started. In late March, when it became clear that many central banks and governments would support businesses and consumers, stocks started to rise again. And by August 2020, the


the benchmark US stock market index, was reaching new heights.

Other bear markets, including the bear market that resulted from the 2008-2009 financial crisis, lasted much longer than a month. But even in a bear market, there’s a lot you can do to position yourself for long-term financial health.

Most important, stay in the market. As Emily Roland, co-head of investment strategy at John Hancock Investment Management, puts it, time in market beats market “timing,” or trades in and out based on guesses about direction. what the prices could take. Between 1928 and 2021, rolling 10-year equity returns have been positive 94% of the time, according to data from John Hancock.

“If you’re in a wealth accumulation phase, you want cheap stocks,” says Rob Arnott, founder of fund management firm Research Affiliates, “You should aim for a bear market.”

So how should you invest during a bear market? Here are six more tips to help you navigate any market.

1. Sign up for Financial Fundamentals 101

Illustration by Alberto Miranda

Before investing money in the stock market, new investors should focus on strengthening their financial fundamentals, says Catherine Valega, Certified Financial Planner at Green Bee Advisory. Prioritize building an emergency savings fund with at least six months of living expenses, she says. This is all the more crucial as the economy slows and potentially heads into a recession, which could lead to layoffs.

Create a retirement savings account, too, either through a work-sponsored 401(k) retirement plan, individual retirement account, or IRA. Once you have an account, work to maximize your annual contributions to the degree permitted by law. At least try to increase the percentage of your paycheck going towards your retirement account over time, Valega says.

2. Pay off high-interest debt

Illustration by Alberto Miranda

Another priority for young investors should be paying off high-interest debt, says Vivian Tu, financial literacy content creator at TikTok. According to Tu, this is any debt with an interest rate above 7%, including most credit card debt. With interest rates likely to continue to rise, that debt could become more expensive, she says.

3. Invest in sensitive assets and diversify your portfolio

Illustration by Alberto Miranda

A good way to take advantage of long-term bullish momentum in the stock market is to invest in a mutual fund or exchange-traded fund, or ETF, that tracks the S&P 500.


(symbol: SPY) is an example. If you have a retirement savings account, you can also choose to invest in a target date fund tailored to your expected retirement date, which changes the stock/bond mix as you get older.

For investors who want to be more active, Tu recommends focusing on consumer staples stocks and stocks of industrial, materials and energy companies, which aren’t as reliant on consumer spending. But only invest what you think you can afford and avoid putting money on the market that you might need next year, says Tu.

Diversification is another important element. Don’t invest all your money in one stock or asset, says Anne Lester, former head of retirement solutions at

JP Morgan

asset Management. Instead, try to have a diverse mix of high-quality bonds and stocks, she says.

4. Use the cost average

Illustration by Alberto Miranda

Rather than investing a lump sum in the market, Valega recommends dividing that money into equal parts and investing it periodically. This strategy is called average purchase. Investors on average buy more shares of an investment when the price is low and fewer shares when the price is high, resulting in a lower average cost over time. Regular contributions to retirement accounts such as 401(k)s are a form of dollar cost averaging.

5. Don’t be addicted to “sexy” investments

Illustration by Alberto Miranda

Bear markets may not be the best time to invest in riskier assets, such as cryptocurrencies, non-fungible tokens and highly speculative stocks, says Valega. If a young investor is heavily invested in crypto, for example, she recommends finding ways to diversify into more traditional assets, such as stocks and bonds, to dampen volatility. “I’m not against it, but just do it with money you can afford to lose,” Valega says of trendy investments.

6. Research, Research, Research

Illustration by Alberto Miranda

Always do your homework before investing in any asset, be it stocks, bonds, funds or cryptocurrencies. Social media can be a good place to start, says Tu, but it’s important to verify what you learn with an authoritative source, such as a respected financial publication, financial institution or advisor, or financial expert. matter. Lester recommends websites such as Investopedia and


aimed at increasing financial literacy.

Online brokers, such as TD Ameritrade, Fidelity Investments,

Robin Hood



), and

Charles Schwab



), provide clients with a plethora of information on individual stocks and funds. Key resources are brokerage analyst reports, stock screens, and tools for performing more technical analysis. Or, you can go straight to the source, by reading company regulatory documents or fund prospectuses.

The markets confuse amateurs and experts. But if you make a savings plan and an investment plan and stick to it, you’ll be off to a good start.

Write to Sabrina Escobar at [email protected]


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