After the longest bull market and economic expansion in history, we have entered an economic and market downturn. The recent, worldwide turmoil concerning COVID-19 has had a significant impact on the national economy, and many investors are nervously checking their investments, unsure of how to proceed.
Certainly, market fluctuations can be nerve-wracking. But keep in mind, you can use a bear market to your benefit. Keep a steady head, work with your trusted financial adviser in Salt Lake City or local areas, and keep your long-term goals in mind. Above all else, don’t follow the crowds and run for the exit.
Here are three things to do during a bear market instead of pulling out all your money. Focus on these points, and you will see things work in your favor in the long-run.
1. Keep a Buyer’s Perspective
When the market takes a downturn, emotions run high. It may seem easier or safer to sell out and move to bonds or cash. Others keep a little more perspective and focus on holding onto what they have, which can be an effective strategy. However, the wise investor will not only hold what they have in a bear market, but they will keep a buyer’s perspective.
When the market is down, you can purchase assets for a fraction of the price. Purchasing stocks while they are cheaper creates opportunities for greater returns in the long-term. Think of it as a sale, and one you don’t want to miss out on.
2. Rebalance Your Portfolio
On the surface, rebalancing can sound a little crazy during a big market downturn. Not only have equities just lost a significant part of their value, but you want to sell some safe assets to buy more or what just lost? The answer is yes, and it’s a vital part of getting efficient long-term returns.
Essentially, rebalancing forces your portfolio to “buy low and sell high.” This actually boosts long-term returns, as you buy assets for cheaper on average and sell them for more. A market downturn makes this process behaviorally more difficult, but is actually the most important time to be disciplined about the process.
A rebalanced portfolio will not only help you come out on top when the market rises again; it will also give you confidence and emotional stability in knowing that you are prepared for any further downward swings. Do not hesitate to be in close contact with your financial advisor during these times.
3. Stick to Your Personal Goals
No matter the state of the market, investors should keep a long-term perspective and focus on reaching their financial goals. This is even more true when the market begins to drop. If you can focus on your long-term goals, you will be able to keep your emotions in check and stay on the path to achieve them.
No downturn lasts forever, and as long as human progress continues, the market will continue to trend upward. A proper long-term strategy entails being able to weather short term storms of intensity, so if your strategy is appropriate in the long-term, it will be appropriate during short-term downturns as well.
Here is the bottom line: long-term investors who exhibit patience during bear markets will recover their losses. In fact, it is even possible to make economic downturns work in your favor through rebalancing, continuing to buy, and focusing on long-term goals.
As we face uncertainty within the markets during this worldwide pandemic, now is the time to work with an advisor to ensure your investments are prepared for the future. Our fee-only financial planners at TrueNorth Wealth specialize in personalized wealth management and investing. Call and schedule a consultation today.
