3 Steps to Keeping Your Money Safe in a Bear Market

Bear markets are one of the most challenging times to be an investor. If you’re feeling concerned about your investments, that’s normal. Even the most experienced investors may struggle during a downturn, and it can be tough to stick to your strategy when stock prices are falling.

However, the moves you make now can impact your investments for years or even decades to come. While it’s not easy to invest right now, there are a few things you can do to keep your money as safe as possible.

1. Avoid pulling your money out of the market

Try your best to keep your money in the stock market during a downturn, if at all possible. While that may sound counterintuitive, bear markets can be particularly bad times to sell, since stock prices are much lower.

If you initially invested when the market was thriving and prices were high, then you sell when the market is down and prices are low, you could risk losing money. Also, if you decide to reinvest your money later once the market has rebounded, you may end up paying a premium for the same investments you just sold.

Of course, there are some situations where you have no choice but to pull your money out of the market. In that case, try your best to withdraw as little as possible and leave the rest of your investments alone. But if you can swing it, it’s best to avoid touching your investments when the market is down.

2. Keep a long-term outlook

When we’re in the midst of a bear market, it’s normal to feel pessimistic about the future. But the stock market has experienced dozens of crashes and bear markets in its history and has a 100% success rate when it comes to recovering from them.

In other words, every single time the market has faced a bear market, it eventually recovered.

^SPX data by YCharts.

The key, then, is to try to stay focused on the long term. Nobody — even the experts — can say exactly how the market will perform in the coming weeks or months. But over years, it’s extremely likely that it will bounce back. If you maintain a long-term outlook, it can be easier to weather short-term periods of volatility.

3. Choose the right investments

In general, a more diversified portfolio will improve your odds of surviving a bear market. Most experts recommend owning at least 25 to 30 stocks from a variety of industries. This way, if one of two of your stocks don’t pull through this downturn, it won’t sink your entire portfolio.

Also, if you’re investing in individual stocks, double-check that each one is a solid long-term investment. Companies that are healthy overall have a better chance of surviving downturns, and the more of these stocks you have in your portfolio, the safer your money will be.

Finally, if you’re nearing retirement age, it may be wise to start shifting your portfolio toward more conservative investments, like bonds.

Ideally, you’ll still keep a portion of your portfolio invested in stocks because this will help your money continue to grow and keep up with inflation. But by investing more conservatively, your savings won’t be hit quite so hard if stock prices fall further.

Keeping your money as safe as possible

Nobody knows for certain what will happen with the market in the near term, but the future is much more promising over the long run. By staying invested, focusing on the long term, and choosing the right investments for your situation, you can rest easier knowing you’re prepared for anything.

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