There are ways to protect your investment portfolio against a bear market and its a must go beyond the traditional “BUY AND HOLD” strategies.
Remember, a bear market is when a market (e.g., S&P 500) experiences prolonged price declines, price typically fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment. A bear market may also accompany general economic downturns. Examples include, The Depression of 1929, the Dot-Com crash, The Great Recession and the recent COVID-19 Pandemic.
There are a multitude of causes for a bear market, several of the more common economic indicators are inflation and/or anemic economic growth coupled with investor sentiment.
Fortunately, strategies have been developed to defend against a bear market. The most common strategy is to diversify the investment portfolio – in other words, don’t put all of your eggs in one basket. To further mitigate risk, however, implement sound tactical and dynamic investment strategies rather than the traditional “BUY AND HOLD” strategies. Tactical strategies can add stability and predictability to your investment portfolio – reduce exposure to market downturns and preserve your wealth.