Bear markets can be a scary part of investing.
But ironically, they’re historically been some of the best times to buy in.
For example, if you invested in a hypothetical, no-fee S&P 500 fund monthly since the beginning of 1990 and let your money sit, your deposits with the highest annualized returns would have been those you made deep in bear markets.
Staying level-headed during a bear is easier said than done, though. You can’t let your emotions get to you, even if your instincts are telling you to run and hide. And above all, you have to know exactly why you’re invested and how much risk you can take on.
Here’s how you make it to the other side:
Evaluate your situation. How much runway and nerve do you have to handle what happens next? Stocks have recovered from every bear market up until now, but the biggest S&P 500 bear markets of the last few decades have taken five to six years to fully recover.
Think beyond the bear. Some discretion may be healthy for markets. Crypto — just like other industries and markets — goes through ups and downs, yet innovation hasn’t died off. In down times, capital becomes more selective and concentrated in proven projects, which strengthens the ecosystem for everyone. Recessions may be painful, but historically, they’ve often sparked innovation and boosted productivity, leading to an even more resilient economy after the storm passes.
Check your risk. Are you over-invested in growth assets like stocks and crypto? Your portfolio may take even longer to bounce back, especially in a period of high rates and hot inflation, and you may have to wait longer for that growth stock or new-age crypto story to pan out.
Separate logic from emotion. Days like today remind us how valuable it is to set buy and sell targets on your investments.
We can’t tell you what the future holds, but we can lean on history to show that times of stress have primarily turned out to be opportunities in disguise. Crazy days are when you’ll likely make some of the best or worst decisions in your investing journey. Trust the numbers, not your feelings.
*Data sourced through Bloomberg. Can be made available upon request.