BROWSE

Bear Market

A bear market refers to a market in which the prices of securities take a dip resulting in significant losses. It is quite difficult to recover from according to investors, and as selling continues, so does their pessimism regarding its future. Even though the figures may differ, if broad market indexes as the Dow Jones Industrial Average suffer a 20% downturn or more within two months, that means they have effectively entered this market.

Bear markets can take a large bite out of returns. On the other hand, if investors are able to avoid the downturns while taking part in the upswing, i.e. the bull markets, they can enjoy profitable returns.

However, that situation is very rare and requires investment skills that amateurs cannot hope to emulate if they don’t have significant experience dealing with the stock market. If you are facing a bear market, the best thing you can do is adjust your portfolio so that you can prevent more losses. These changes are a combination of asset allocation amendments and switches within a portfolio.

How to Avoid Losses from a Bear Market

There are a number of things you can do to save yourself from losses in case a bear market is imminent. The following are some of them in detail:

Reorganize Growth Stocks – If a bear market is imminent, the first thing you need to do is to reorganize your portfolio. You can do that by figuring out the risks of your holdings like mutual funds, a single security or any other assets you have. Stocks that are the most vulnerable in a bear market are high in value according to existing and future profits. If the market comes crashing down, the value of these growth stocks will be the first to fall.

Value Stocks – When markets take a turn for the worse, or you find yourself in the middle of a bear market, your value stocks may save you. They usually outperform broad market indices since they have lower P/E ratios and there is also an influx of capital investment from investors who wish to purchase them during this time.

Unpopular or Lesser Known Stocks – Most young investors usually turn their focus on organizations that have high valuations, belonging to high profile industries or which specialize in selling popular products. If you are facing a bear market, this strategy can give you the perfect opportunity to explore potentially profitable new markets, industries and products.


Further Reading


Stability tests for alphas and betas over bull and bear market conditions
www.jstor.org [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

Two centuries of bull and bear market cyclesTwo centuries of bull and bear market cycles
www.sciencedirect.com [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

Asymmetric beta in bull and bear market conditions: evidences from IndiaAsymmetric beta in bull and bear market conditions: evidences from India
www.tandfonline.com [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

Bear market periods during the 2007–2009 financial crisis: Direct evidence from the Visegrad countriesBear market periods during the 2007–2009 financial crisis: Direct evidence from the Visegrad countries
akjournals.com [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

Mutual fund systematic risk for bull and bear markets: an empirical examinationMutual fund systematic risk for bull and bear markets: an empirical examination
www.jstor.org [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

Do higher oil prices push the stock market into bear territory?Do higher oil prices push the stock market into bear territory?
www.sciencedirect.com [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

Predicting the bear stock market: Macroeconomic variables as leading indicatorsPredicting the bear stock market: Macroeconomic variables as leading indicators
www.sciencedirect.com [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

Monetary policy and stock market volatility in the ASEAN5: Asymmetries over bull and bear marketsMonetary policy and stock market volatility in the ASEAN5: Asymmetries over bull and bear markets
www.sciencedirect.com [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …

The behavior of Japanese individual investors during bull and bear marketsThe behavior of Japanese individual investors during bull and bear markets
www.tandfonline.com [PDF]
… Bull-Bear TA2 # 0 24 3.4% Oct … "Can Mutual Funds Outguess the Market?," Harvard Business … "Linear Estinmation for Linear Regression Systems Having Infinite Variances," unpub- lished paper presented at Berkeley-Stanford Mathematical Economics Seminar, October, 1963 …



Q&A About Bear Market


When are broad indexes considered part of a bear market?

If broad indexes like the Dow Jones Industrial Average suffer two downturns or more within two months, they have effectively entered this market.

What do you need most during a bear market?

The best thing you can do during a bear market is adjust your portfolio so that you can prevent further losses. These changes are combination of asset allocation amendments and switches within portfolios. There are several things you can do save yourself from losses in case a bear markets imminent; the following are some of them in detail... Reorganize Growth Stocks If there's an impending bull markets, reorganizing your portfolio by figuring out risks associated with holdings like mutual funds, single security or any other assets should be done first before anything else. Stocks that are vulnerable during such times include high-value stocks based on existing and future profits which will be affected first by falling prices if markets take turn for worse or enter into another recessionary phase as it was seen recently after 2008 global financial crisis (GFC). Value Stocks During times when markets take turn for worse or entering into another recessionary phase as it was

What happens if you are able to avoid downturns while taking part in upswings?

You can enjoy profitable returns if you are able to avoid downturns while taking part in upswings. However, that situation is very rare and requires investment skills that amateurs cannot hope to emulate without significant experience dealing with the stock market.

What does a bear market refer to?

A bear market refers to the period of time when prices of securities dip resulting in significant losses.

How is it difficult to recover from a bear market according to investors?

It is quite difficult to recover from a bear market according to investors because selling continues and pessimism regarding its future increases.