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The Bear Market: 5 Facts About It and 5 Ways to Survive It

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5 Ways to Survive Bear Market

With the rise of inflation, there have been a lot of talks amongst investors and financial analysts about our economy. In particular, they’re concerned that the United States is going into what is known as a “bear market”. Now, you might think that a bear market is a horrifying or illegal term. Funny enough, while no animals are harmed, it can spell a lot more trouble for you and your family. Here’s what you need to know about the bear market and interesting facts about it.

What exactly is a “bear market”?

There are two terms to describe the economy depending on whether it’s going well or not. The first is known as a “bull market”, named as such because bulls are known to swipe their heads upwards when striking. In that same vein, a bull market is when the economy is growing strong. 

Many signs can tell analysts and investors if a bull market is happening. The most telling signs include a higher gross domestic product (GDP), and rising profits for companies and organizations.

A bear market is the exact opposite of a bull market. Named after bears, because they swipe their claws down when attacking, a bear market is a bad sign for your money. It means that the economy is getting weaker, and the inverse of all that you want happens. These problems include:

A rise in unemployment

Generally speaking, a bear market is going to be a big hit for companies and businesses alike. It’s going to cost more to produce, manufacture, transport, and offer high-quality services, among other things.

Unfortunately, one of the biggest problems is that unemployment also rises. Companies lose the power to pay their employees as well as before, which can lead to serious pay cuts or pink slips.

A longer drop in spending power

On average, the rise and fall of the dollar’s spending power are going to be a series of peaks and valleys. Within a week, the value of a single dollar bill can go up and down in overall use.

5 Ways to Survive Bear Market Calculator

However, during a bear market, the drop lasts longer and goes steeper than you’d expect. When the dollar loses a lot of its value as time goes on, it’s a bad sign for your savings and salary. In short, you might find your money to be less useful than it was in prior years.

A nervous atmosphere

Lastly, a bear market gives the same kind of vibe as an impending hurricane or an oncoming snowstorm. It causes a lot of worry and confusion amongst financial analysts and investors. They generally see the trend going further down, instead of swinging back up.

While you can say it’s just being pessimistic, you can’t deny that momentum can hurt the economy. So, if you notice that prices are getting higher by the day, you might need to stop and pay attention to what’s happening.

What do we know about the bear market?

Given the rise of inflation and the way it’s affected our lives, especially after the pandemic, it’s no wonder that analysts are worried about the bear market once again. However, not everything about the bear market is entirely bad. Here are some interesting and useful facts that you need to hear!

1. Bear markets take three months to confirm.

When bear markets hit the economy, it’s not an immediate concern. It can take at least three months or more before you can safely confirm it. That’s because a bear market happens when there is a prolonged decline in prices for three straight months.

So, if you’re looking at the news and you see that the prices have suddenly gone down, don’t panic just yet. A shift in momentum isn’t a foreboding sign that the economy will get weaker. However, if a bear market does hit…

2. Stocks and market indexes fall by 20%.

Stocks and market indexes suffer a lot during a bear market. Studies on the price of stocks show that they lose an average of 36% in a bear market economy. It’s why investors pay close attention to the trends and try to see if the prices are rising or falling.

It’s also why they are willing to wait for a bull market. While a 36% drop is nerve-wracking, it’s also shown that in a bull market, stocks go up by 114%.

3. Bear markets don’t always lead to a recession.

While a bear market can be hard on your cash, it’s not always a sign that the economy will fall into recession. In fact, since the Second World War, there are only three bear markets out of a dozen that have led to such a problem. These events include the housing market crash in 2008 and the COVID-19 pandemic. So, while it’s not going to be easy, a bear market can still be survived.

4. Bear markets are relatively short.

According to Hartford Funds, bear markets typically last nine and a half months. Since the inception of the S&P 500 Index, there have been only 26 recorded in history, and they’ve gotten less frequent since World War II. Conversely, there have been 27 recorded bull markets, and they can last for an average of three years or more.

5. You’re likely going to face more bear markets in the future

You might think that the bear market is either an ever-present problem or a fad. Funny enough, you’ll go through a lot more bear markets than you’d expect. In fact, on a 50-year investment plan, you might go through as many as 14 bear markets. 

Don’t be discouraged, though. Even when prices have fallen, statistics show that stocks have still managed to rise by over 75% from the S&P 500 Index’s creation.

What can I do to survive the bear market economy?

Bear markets can be a scary time, but the facts show that they aren’t as devastating as you might think. However, you should still take time to protect your money and keep it safe. Here’s how you can survive a bear market and use your money wisely throughout that time.

5 Ways to Survive Bear Market Alone

1. Think of the future, not the now.

The first and most likely reaction that people will have to a bear market is to panic buy or to stock up on their savings. As logical as that may sound, it’s not the smartest move. After all, it’ll be like running and screaming during a house fire. You might be protecting yourself now, but in the long term, you’re only risking your life and your assets.

Take a moment to step back and look at everything first. A strategic approach and review of what you have can help you plan for the future. For example, what kind of assets do you have that need to be paid off? If you focus on clearing out your debts now, it’ll give you a lot less stress and a lot more time to grow your money back.

2. Adjust to the changes in both money and time.

Aside from the choices you make, the approach you have for any financial decision should be flexible. In other words, you shouldn’t always stick to the same attitude or routine, even if it has worked out in the past. Not every question arrives at the same answer, especially when it comes to money.

For example, if you were in a bull market, you might start aggressively investing in your portfolio. You have enough funds and confidence to explore your options and see what works and what doesn’t. In a bear market, however, doing so can only work if you have a lot of funds and a lot of patience.

Otherwise, you might need to pull back and plan accordingly. The same works for your life at home. Consider what treats or luxuries you enjoy that might not be worth the extra cost in the long run. Does that delicious KitKat bar have to be in your pantry? If not, take a deep breath and walk away. Your wallet will thank you later.

3. Expand your portfolio.

A good tactic in both business and life is to expand your portfolio. You’ll find that the biggest losers as the ones who place all their eggs in one basket. For example, you might have banked a lot of shares on popular brands like Apple or Nike. It may seem like an easy win, but with inflation rising, you’ll find that your shares might cost less than you bought them for.

If you want to expand your financial index, consider investing in multiple companies. Think of buying shares from several different groups, and you’ll be more stable as the prices go up and down. While you might not strike it rich right away, this tactic can help your money grow larger and larger over time.

In life, you can take a different approach and start using this bear market to explore other income plans. For example, the pandemic caused a lot of people to have limited work or even lose their jobs entirely. Some used the quarantine as an opportunity to make some new cash through side hustles, like baking treats or selling plants. It might not be your next career, but there’s no harm in trying a new project, especially one that fits your hobbies and helps you get some more pocket change.

4. Focus on quality investments.

If you want to survive during a bear market economy, take a page from the world’s richest man, Warren Buffett. An icon in the financial world for being both brilliant and cunning, Buffett’s advice for people is to focus on making quality investments. For him, it’s not a matter of how cheap you can get the shares; rather, it’s whether or not that company can provide high-quality service.

It’s the same tactic that brought him to the highest net worth of all time. Buffett never focused on buying the most popular or trending things. Instead, he cared about whether or not the company, from top to bottom, was capable of doing its job well.

Even if you’re not an investor, you can follow this principle in other parts of your life. For example, look at the car you want to buy and the car you need. The difference isn’t in the number of features or cupholders, but rather in the price and the payoff. Even if it’s an expensive car, can it keep your fuel costs low or save you a ton of trouble in travel? It’s that kind of mentality that can make even the toughest financial decisions seem so simple.

5. Stay positive but cautious.

Many people believe that with the rising inflation rate, the presence of COVID-19, and the daily stress of managing life, a bear market economy is going to be a nightmare. While it can be difficult, always remember that there have been multiple bear markets and people have survived even the worst ones. Whether it’s the housing market crash or the Great Depression, there are many examples of economic problems that people have come out stronger from.

5 Ways to Survive Bear Market Woods

Above all else, remember that a bear market isn’t the end of the world. It may be a tough time, but there’s always a chance to bounce back. Remember the words of Chris Gardner, a businessman who struggled with bankruptcy, as depicted in the movie The Pursuit of Happyness: “The world is your oyster. It’s up to you to find the pearls.”

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