How to Invest in a bear market
Don't hide in a cave when the market is down. Find stocks that will pay off when the bull makes its return.
You Will Need
* Stocks at limit price below market
* Small-cap stocks
* Dividend-paying stocks
* Currency of developed countries
Sell your mutual funds, which tend to drop in a bear market because everyone is selling the same stocks.
Buy stocks now at limit price below market, which means placing an order to buy stocks if and when they fall to a certain price. These orders come with a time limit.
Buy small-cap stocks, also known as emerging-growth stocks, which tend to go up in a bear market because they are not owned by mutual funds.
Sell any emerging-market stocks, which often do poorly when the world economy is suffering.
Play it safe with bonds and dividend-paying stocks, which usually offer steady returns.
One rule of thumb is that the percent of your portfolio invested in bonds should match your age.
Don't buy stocks on margin, which means buying them with borrowed money. This is always risky, but more so in a bear market, when stocks tend to decline due to a sluggish economy.
Buy initial public offerings, known as IPOs. In a bear market, only the most financially sound companies have the luxury of going public.
Buy currencies of mature economies, which may increase in value during a bear market because they often stay more stable during periods of decline.
Fact: After the 1929 stock market crash, stocks did not return to their pre-Depression levels until 1954.