How To Make Money In A Bear Market

Shawn Plummer

CEO, The Annuity Expert

The stock market is unpredictable, and investors often stumble when the market turns south. The term “bear market” refers to a prolonged period of market decline, typically lasting for months or even years. During these times, investors who don’t adjust their strategy must endure huge losses. Fortunately, there are ways to make money during a bear market. Here are some tips to help you make money during a bear market:

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What Is A Bear Market?

A bear market is when the stock market experiences a sustained price decline. This can be for many reasons, such as an economic recession, political instability, or high inflation. The decline must last at least two months to be considered a bear market.

In a bear market, stock prices tend to fall and stay down for an extended period. This can be a problem for investors trying to grow their portfolios or preserve their capital. So if you’re considering buying stocks during a bear market, it’s essential to research and understands the risks involved.

What Is A Bear Market

How Does A Bear Market Affect My Investments?

A bear market can significantly impact your portfolio if you’re invested in the stock market. When the market is down, the value of your stocks and other investments will likely decline. This can lead to losses in your portfolio, so it’s essential to be aware of the risks before investing.

How To Profit In A Bear Market

What Can I Do To Protect Myself From A Bear Market?

You can do a few things to protect yourself from a bear market. One is to diversify your investments, which means investing in different types of assets that aren’t all affected by the same factors. Another is to have a long-term investment strategy, which can help you ride out the ups and downs of the market.

For example, fixed annuities could be a moderately short-term way (at least two years) to sidestep a bear market for IRAs because a qualified fixed annuity offers principal protection and a guaranteed interest rate. Then, after the annuity’s term is complete, transfer back to a traditional IRA when the market stabilizes.

No one knows when a bear market will happen, but by being prepared and understanding the risks, you can minimize the impact on your portfolio.

How To Make Money In A Bear Market?

Invest in Dividend-Paying Stocks

Dividend-paying stocks are an easy way to make money in a bear market. They pay a steady income, regardless of whether the market is going up or down. So while the stock may not increase in value, investors can still rely on the dividend payments.

Invest in Defensive Stocks

Defensive stocks are stocks that are less sensitive to economic downturns. As a result, these stocks tend to perform better than the broader market during a bear market, providing investors with a great way to generate returns. These stocks include utilities, consumer staples, and healthcare stocks.

Look For Value

When the market is declining, undervalued stocks often allow investors to buy at a lower price and profit when the market recovers. Conversely, by looking for value stocks, investors can find opportunities to buy stocks that have the potential to rebound when the market improves.

If you need help choosing the right stocks, we recommend the following:

Help Choosing Stocks
The Motley Fool

Invest in Bonds

Bonds can help investors generate a steady income stream, regardless of the stock market’s performance. This is because bonds are less risky than stocks and provide a steady income stream to help investors make money during a bear market.

Invest in Real Estate

Investing in real estate can be a great way to make money during a bear market. This is because real estate tends to be less volatile than stocks, making it a safer investment. Investors can also use foreclosures and distressed properties to get a good deal.

Invest In Fixed Indexed Annuities For Retirement

An Inverse Performance Trigger strategy in fixed-indexed annuity credits a fixed interest rate to the account each year if the index performance is equal to or less than the starting index value. If the ending index value exceeds the beginning index value, the money allocated to this option will receive a 0% interest credit percentage.

Next Steps

While bear markets can be scary, they don’t last forever. Eventually, the market will recover and start to trend upward again. If you’re patient and have a long-term investment strategy, you can weather the storm and come out ahead.

Hopefully, this guide has given you a better understanding of the down markets. As always, do your research and consult with a financial advisor to make sure you’re making the best decisions for your situation. Contact us if you’d like a quote.

How To Make Money In A Bear Market

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Frequently Asked Questions

What to do during a bear market?

During a bear market, it is essential to rebalance your portfolio. Diversifying with stocks, bonds, and cash will ensure you remain agile in turbulent markets. Tax-Loss Harvesting can help alleviate the impact of significant losses while investing in risk-averse assets like gold or treasury bills can protect from significant downturns. Taking advantage of any opportunities to buy into low points and staying on course through the storm is critical when navigating volatile conditions.

What to avoid in a bear market?

During a bear market, it is essential to avoid the following mistakes to protect your investments: Fleeing from volatility; Not having cash reserves; Accidentally activating the wash-sale rule; Listening to panicked analysts’ predictions, and Obsessively monitoring your accounts.

Is a bear market down 20%?

A bear market is often characterized by a 20% drop in significant stocks, an arbitrary measure. However, it can also be seen when investors tend to shy away from risk rather than seek growth opportunities. With either definition, the markets present an undeniably difficult climate for those looking to invest their capital.

What is a bear market vs. recession?

A bear market is a multi-month period in which the prices of securities fall by 20% or more. Meanwhile, a recession occurs when economic activity (as evidenced by GDP) drops for two straight quarters.

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*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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