Bear Markets: 4 Ways to Ride Out the Storm


When we say we’re in a bear market, we simply mean that the market is crashing down so hard it’s hard to see in the rubble. Well, it’s a disaster for many, but that doesn’t mean you can’t ride out the storm. There are ways to survive it, but we’ll tell you that later. Let’s first get into what you have to know about the bear market.

businessman fighting a bear
Take a look at our list below to know how to weather a bear market storm!

Demystifying the Bear Market

The term market crash can sometimes be confused with a market correction. It’s important to know whether you’re already inside a bear market, or you’re just peeking at the possible cliff of a market crash.

To differentiate: a market correction typically refers to just a 10-percent fall. Generally, a market correction is a good buying opportunity for you. And if you got good buys during the correction, you’re in for a treat. This is because there will almost always be a longer bull phase that follows a correction.

Now, when the fall exceeds 10 percent and extends to 20 percent, you should begin bracing yourself. You’re about to enter a change in phase—you’re in the bear market territory.

A Little Bit of History

According to studies, the world has seen more than 30 bear markets since 1900. You do the math, and you’ll come up bear market every roughly 4 years.

Historically, the stock market takes its precious time climbing up the ladder. And when it decides to skydive, it falls quickly, roughly, and disastrously. You won’t have time to breathe—if you forgot to do your homework.

According to experts, a bear market typically lasts for 15 months, and the average drop is around 30 percent.

Short Sellers’ Buffet

Though some people say that short selling in the stock market is unethical (because you’re practically hoping that a company further declines), remember that the huge names in the investing world are short sellers. Some of them even landed the top ranks around the world.

Now, if you’re not too crazy about the idea of short selling, you can always protect yourself by dip-buying extreme drops. It won’t give you as much money as short selling, but you’ll get geared nonetheless.

You can also increase your cash exposure. If you can’t sleep at night thinking that the market might see a nastier fall, go up and start selling some of your weakest links. Nothing feels more reassuring that holding cold cash in the palm of your hands.

Now here are the Strategies

Let’s now imagine that the bear market has already started, like, a few moments ago. What should you do? Let’s get into the strategies.

Grab Cold Cash

When we say grab, we mean go 100-percent cash. Jump off the ship. Many people think that this is a desperate move to avoid losses in a bear market—but that’s exactly what you want to do!

The good thing about this is that you can sit back, watch TV, see investor scurrying around and holding on to their precious assets, and drink that cold bottle of Budweiser in the comfort of your house.

After the bear market has passed, you can get back in the game. It’s much like playing dead when you meet a real, vicious bear. The only problem you might face is the so-called “sucker rallies.” These sucker rallies are like sucker punches. You comfortably get in and ready to start anew, and then you realize something hit you in the back of your head: the market is crashing again!

Sucker rallies have fooled a lot of other investors. What you can do is to act upon fundamentals. Check everything out and explore all avenues before re-entering the market.
If you really think it’s awful to jump off ship and leave all other investors in there sinking, you can just try to go partially into cash.

Portfolio Hedges

If you’ve been trading for a while, you may have noticed that some securities can provide some protection to your portfolio. Some of them even have a hedge that can move toward the opposite direction of major indexes.

Before you grab these things tight, you first need to check yourself. The suitability of those securities depends of your skills, knowledge, and risk tolerance. If you do everything right, you might these strategies offsetting a big portion of your portfolio’s big losses.

Caveat: remember that if the market suddenly rallies, you can still suffer huge losses since these types of securities move in the opposing direction.

Use Stop Loss Orders

If you really want to fortify your portfolio against the downsides, stop loss orders can give you a hand. Stop loss orders are orders placed under the current price. If a stock you hold slides down to the predetermined price, it will be sold—automatically.

In addition, you have the choice to keep your portfolio if all the Stops are reached. You can also raise them higher if the prices go up.

However, stop loss orders are not perfect. They can’t guarantee that the stock will be taken care of at the price you set. Why? If the stock price slips below the stop price, you may get the lower price.

Be Active

This is not suitable for all investors. Being an active trader doesn’t only mean day trading. It means that you have to watch a particular security and trade it from one point to the other. You cannot care if it goes farther up.

You have to be willing to take losses if your trade doesn’t go the way you wanted it to. But if you can do it right, it can put more percentages of return to your portfolio’s performance.
It goes without saying that you risk losing money easily. You can imagine them flying away from your pockets. Other scenarios can include you being too greedy and being too eager to trade and trade and trade. When that happens, your losses can pile up rapidly, stacked on top of each other and reaching the roof.

Read more about protecting yourself against risks. See Spreading Out Investments for Reducing Risks


It’s not far-fetched that the bear market will always come back to hunt investors, no matter how good the market looks like right now. And you can’t make it disappear forever. You can only strengthen your portfolio, prepare your strategies, and anticipate all the possible twists that the market can offer.  

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