The economy has been in a bear market for a whole year. And, while there have been minor upticks now and then, it’s not over yet. Morgan Stanley states that we haven’t reached the market bottom yet. As a result, we may continue to see interest rates rise and stock prices fall.
As an investor, that may not sound like the news you want to hear, but there are effective ways to manage your portfolio and maintain a strong position during a bear market.
5 Tips for Surviving A Bear Market
Although a bear market does not foster a favorable investment environment, there are still smart strategies and actions you can take to keep your portfolio in shape.
Consider alternate investments
It’s always valuable to craft a diversified portfolio. A diversified portfolio helps to provide security during any economic environment, especially during a bear market. In a way, they act as a safety net against losses.
Traditionally, diversification may look like investing in various bonds, mutual funds, certificates of deposits (CDs), exchange-traded funds (ETFs), etc. But there are alternate investments outside of the stock market, such as Small to Medium sized Enterprises (“SMEs”) real estate, and commodities (gold, oil, agriculture) that you can add to your portfolio. It also helps to have a mix of short-term and long-term investments that align with your goals. Always take caution when making riskier investments.
Rebalance your portfolio
In the spirit of balancing, there’s also something called portfolio rebalancing, which is the process of adjusting the allocation of your assets. During rebalancing, you buy and sell assets to reach your desired portfolio composition. It’s essentially a financial tune-up or check-in to ensure that your risks and rewards are leveled, you’re on track to meet your financial goals, and you are getting the desired returns.
Although rebalancing involves buying and selling assets, it is a process that ultimately supports your long-term investment goals. Many investors overlook investing in the SME class because 1. It can be difficult to source good investments, 2. Due diligence on smaller companies is just as time-consuming as in larger companies, 3. And tracking the performance over time, and identifying an exit strategy and the timing of an exit can be challenging without expert advice. TAP Financial has recently launched a new product “TAP-IDEA” aimed directly at solving these barriers to entry into SME investing. Plus, because of the barriers to entry for much of the uniformed investor community, the returns can be potentially be superior to publicly traded companies, [Citation from the SBA for the growth of SME’s]
Even though a bear market is not pretty, you should continue to invest consistently. This practice is known as dollar cost averaging, when you invest a fixed amount at regular intervals, regardless of market conditions. It’s a great strategy that encourages you to invest even during economic environment transformations, such as surging inflation, rising interest rates, and geopolitical tensions. Another benefit is that it maintains the habit of investing regularly, which lessens the stress of timing the market. Investing in quality SME’s during downturns can be particularly rewarding because the competition from other investors is greatly reduced.
Balance your portfolio into more conservative investments with more runway
Looking to be more secure with your money? Consider investing in assets with the least amount of risk, also known as conservative investing. In this strategy, you’re playing it safe by investing in assets that will maintain their value regardless of market conditions. Some examples of safe, conservative investments include CDs, high-yield savings accounts, and treasury bills. Consider this type of strategy if you have a low risk tolerance. Select SME investments can also be conservative because SME’s make up the backbone of the U.S. economy. [SBA citation]
Consult with financial partners
Finally, if you need assistance navigating SME investing in a bear market, reach out to financial partners, such as TAP Financial Partners. They have invaluable knowledge of the economic market and can provide advice and guidance on managing your portfolio during bearish times.
These portfolio strategies are helpful during a bear market and for any economic environment. Rebalancing and working with a financial partner are always good strategies to keep your portfolio on track to meet your goals.
Get in touch with TAP Financial Partners to learn more about your options.