Bear Market: Your Chance to Create Serious Wealth With 2 Growth Stocks (2024)

FAQs

Do bear markets make you rich? ›

In fact, a bear market can give you more shares of the companies you love, and make you more money over time. A good, old-fashioned buy-and-hold strategy paired with dollar-cost averaging is just a way to consistently accumulate shares.

Diversifying one's portfolio and favoring higher-quality stocks can curb bear market risks while increasing long-term returns. Defensive stock sectors including consumer staples, utilities, and health care tend to outperform during bear markets.

But you can maximise your chances of a profit in a bear market by following bearish-friendly strategies. These include diversifying your holdings, focusing on the long-term, taking a short-selling position, trading in 'safe haven' assets and buying at the bottom.

A potential strategy in a bear market (or any market) is to buy and hold stocks from major index funds like the S&P 500. Data from Crestmont Research shows that S&P 500 returns in any 20-year period from 1919 to 2022 were positive.

By reducing the market exposure to 80% with a 20% cash position, the same market loss results in a portfolio loss of only 8%. It gives you peace of mind, which can reduce the chances of panic selling when the market is volatile.

When you jump into a plunging market, you must be willing to embrace the likelihood of further losses before you may see potentially greater returns when the bear finally yields to the bull. It's a hard pill to swallow, and many investors just can't do it. As a result, they can miss out on the opportunity to buy low.

As shown above, recovery times vary widely and depend on the economic environment. When bear markets are not accompanied by recession, recoveries from bear markets only took an average of 10 months to reach a new record high.

The duration of bear markets can vary, but on average, they last approximately 289 days, equivalent to around nine and a half months. It's important to note that there's no way to predict the timing of a bear market with complete certainty, and history shows that the average bear market length can vary significantly.

Selling off all your stocks after seeing red in your portfolio during a bear market is the last thing you want to do. Volatility is scary, especially if you are risk averse, but running with the volatility wave is key and beneficial to the success of your long-term portfolio.

What to buy at the bottom of a bear market? ›

Think about the things consumers will need no matter what – those are the sectors that tend to perform well during market downturns. Even amid high inflation, people still need gas, groceries and health care, so things such as consumer staples and utilities usually weather bear markets better than others.

For example, value stocks tend to outperform during bear markets and economic recessions, while growth stocks tend to excel during bull markets or periods of economic expansion. This factor should, therefore, be taken into account by shorter-term investors or those seeking to time the markets.

Investors can create a hedge with defensive stocks during a bear market if they do not want to exit the markets entirely. Examples include The Procter & Gamble Company (PG), Campbell Soup Company (CPB) and The Coca-Cola Company (KO).

Investing in bonds is also a common strategy to protect oneself during a bear market. Bond prices often move inversely to stock prices, and if stocks decline, a bond investor could stand to benefit. Short-term bonds in a bear market could help investors weather the (hopefully) short-term downturn.

A bull market describes a period of continuous growth in the stock market of at least 20% and often coincides with a strengthening economy. Bull markets are generally a more profitable and less risky time to invest, but investing during bear markets can be beneficial, too.