A bear stock market is often considered to be an investor's nightmare: as share values plummet and hard earned gains evaporate, it's hard to see the forest for the trees. It's important to remember at times like these that such downturns, even dramatic ones, are part of natural economic cycles. The trick is to weather the storm, not panic, and you may even come out ahead when happy times return.
Be patient. Be patient! If you are a long term investor who plans to stay in the market for at least another 10 years, it's best to ride out the storm without making any knee jerk decisions. Decisions born out of panic seldom produce good results. Keep a cool head, study options out thoroughly, and then make up your mind about what is best to do with your money.
You may want to adopt a less aggressive strategy by putting your money in a safer arena like money market securities. It will still be earning interest without the risk of losing its value. In addition, keeping assets liquid will enable an investor to purchase a good stock when the opportunity arises.
An aggressive strategy is to use a short sell approach which allows an investor to make money as the stock goes down. This technique is not for the faint of heart: there are risks involved in this kind of strategy. If you a novice in trading in general, or are not well versed in the short sell, it would be wise to consult with a professional advisor before adopting such a scheme.
Look for deals: most blue chip stocks, for instance, are bound to increase in value when the bear market turns bullish. There are some real opportunities out there for those who have the experience and know how to spot a good bargain. As with the short sell approach, less knowledgeable investors may wish to work with a more seasoned professional to learn how to find the best value for their hard earned money.
Your mom was right when she advised you not to put all of your eggs in one basket. Diversification of your assets ensures that your money will be as safe as possible during trying times. Make sure your wealth is divided into at least four different types of investments (such as stocks, bonds, etc.), as well as having money in the bank earning interest. If you are a cautious person by nature who is uncomfortable with a lot of risk, then your smallest slice of pie should be allocated to stocks.
Making money when the market turns bullish again is more likely if you invest wisely during the downturns and manage your assets carefully. The best advice is not to make decisions based on panic. Happy days will be here again!
About the Author:
For useful
stock tips that will help you decide how to succeed whether the market is a bear or a bull, contact the professionals at Blue Chip Stock Trader (http://bluechipstocktrader.com/). Art Gib is a freelance writer.
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118
Date Published :
Dec 31 2008