(or at least survive)
What do experts recommend when the market is headed South?
Most investors know that sometimes markets go up, and other times they go down. And while many people will choose to look for shelter, others view a bear market as an opportunity. And the most savvy investors consider all their alternatives in any market, knowing which strategies can be used to play either side. Not only does a downswing eventually result in many undervalued companies to snap up before they potentially go back up, but there are other strategies that generate profit when prices continue to decrease. You’ll find many of those strategies highlighted here so you can learn ways to invest in a downward moving market. We’ll start with a few time-tested strategies to play a bear market:
- Dollar cost averaging
- Stock shorting
- Downturn-resistant industries
And of course, everyone has an opinion, so we’ve brought together several different viewpoints from the ZeccoShare community, as well some highlights from around the web.
Before you get ahead of yourself, there is an important thing to remember. In order to ride out waves of volatility, you need to be comfortable with your investing strategy and take any fear or emotion out of you investing decisions. Otherwise you’ll be doomed to the age old story of buying when the market is strong and selling when the market is weak. So this is a good opportunity to evaluate your investment philosophy and identify investments that meet your criteria.
Dollar Cost Averaging
If you want to avoid “buy high, sell low,” then this is can be a valuable strategy in a down market. The dollar cost averaging (DCA) strategy includes spending a fixed dollar amount at regular intervals on a particular investment, regardless of the share price. This way, more shares will be purchased when prices are low and fewer shares will be bought when prices are high. So over time, the average cost basis will be lower than if all shares are bought at the same time.
Short Selling and Short ETF’s for Downward Markets
Many investors choose to sell a stock short if they believe the price of a stock is going to decline. The way this works is that an investor is allowed to borrow a stock and then sell it to someone else. Then, if the price of the stock decreases, it can be bought (also called covered) back at the lower price and returned to the lender. Of course, you have to pay interest on the stock for the privilege of borrowing it. And it’s a risky strategy, because if the stock price goes up, the loss has unlimited potential.
Alternatively, short ETFs allow investors to profit from declines in an underlying index without directly selling short any securities. Short ETF’s track the inverse of various indices, so that the value of the shares will increase or decrease in value inversely with the index.
Look For Downturn-Resistant Investments
Many people simply want to move their investments to recession-proof stocks, rather than adopt a completely different trading strategy. Some people consider size, industry, or financial stability as important factors when they examine how a company is going to do when the market heads South.
WHAT DO THE EXPERTS THINK?
14 Winning Strategies for a Bear-Market RecessionPaul Farrell on Market Watch O.K., so you're a perma-bull, a perennial optimist convinced there's always a bull market somewhere. Plus, you've got the time and the smarts to find that bull.
A History of RecessionsCNBC.comEconomics is known as an imprecise science and one might need look no
further than the business of calling recessions to see that.
Five Investing Strategies For A Down MarketSeeking Alpha Just because you lost money doesn’t mean that investment opportunities have dried up. In fact, there are more opportunities today than in the past year.
Why This Bear Market Isn’t Scary At All
Timothy Sykes If you rid yourself of your optimistic biases and play by the charts, bear markets can be surprisingly easy to navigate. In fact, I had a nice little 4% gain...
Economic Downturn: Profiting With the Five PillarsThe Disciplined Investor So what do you do when it comes to investing in this turbulent time? Do you panic and pull out all your investments, toss the cash in a garbage bag...
The Market’s Crashing – Are You Recession Proof? Silicon Alley Insider Don't put much stock in predictions saying "It's just a bull-market correction. The point is that no one knows what will happen in the market or economy...
Basic Investing in a Down MarketThe Simple DollarMy philosophy is that the instant an investment makes you nervous, you should pull back into something safer. This is a very conservative approach...
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FROM THE FORUMS
Picking the Right Stock in a Down MarketStocks that people
will always buy the products of are Warren Buffett's favorites. These
include gambling stocks, beer and alcoholic...We Love To Sell Short Want to talk to other ZeccoShare investors about shorting stocks? Here’s a group dedicated to this investing strategy. Questions? Ask
.Andy.! Gold ive bought into gold (20% allocation) for my own portfolio. with a recession or a recession like period it is a good idea...
What should one invest in during a RECESSION?Wall Street is very nervous that our economy is pulling in to a recession. Mr. Buffett has basic rules as to what to put your money in during a recession.
Crash Course or Rebound?No one can perfectly predict the direction of the market so it is wisest to follow the market and minimize your losses when it quickly turns on you.
Dividend-Paying StocksMany investors are so scared by the wild gyrations the stock market has seen of late that they've jettisoned everything - including the kitchen sink - in their search for safety.
Folks That Traded Through Bear MarketsOver one month and we are still headed down. Only thing is I find it hard to believe our current politicians would do anything to keep the economy happy as this is an election year.
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