How Can I Protect My Money in a Bear Market?

When the stock market takes a dip, it’s only natural for your palms to start to sweat. A bear market refers to a period in which the market as a whole takes a downturn or when economists witness a dive in a particular market index like the S&P 500.

For individual investors, a bear market can indeed be nerve-racking, but there are some ways you can protect your money during this period. Here’s how:

Don’t Try to Time the Market

Markets tend to move in cycles, and some people attempt to profit by timing the sales of stocks based on these cycles. The hope, of course, is that by timing the market “just right,” you’ll stand to benefit from great gains or mitigate your losses.

On paper, this sounds like a good strategy — not so in real life. Market movements and cycles tend to be complex, and rarely will you be able to time the market successfully.

Instead, aim for long-term gains by investing in buy-and-hold stocks, representing companies that will provide growth over a long period of time.

Find the Right Balance

Navigating a bear market demands a well-balanced investment strategy. Ty Young, CEO of Ty J. Young Wealth Management, has created a philosophy known as the “three-legged stool” approach to managing your portfolio. You want a retirement plan that provides for three specific areas:

  • Income to meet monthly necessities after you retire
  • Growth to protect your income against inflation
  • Protection to support growth against unexpected setbacks

Finding this balance can help you be prepared before the storm hits. Ty J. Young specializes in helping investors find a strategy that aligns with their investment goals and protects their wealth as they pursue their long-term aspirations.

Add Annuities for Safe Returns

Annuities are a great way to plan for retirement. They provide a safer approach to retirement planning since they offer protection against economic downturns.

Ty Young recommends a type of annuity known as a “Fixed Index Annuity.” How does this work? Young explains that “when the stock market goes up, your money goes with it. Your gains lock in on an annual basis. When the market goes down, you don’t lose anything. You do receive compound interest, and there are no annual fees.”

This setup means that you gain from market upswings but aren’t vulnerable to the downturns associated with a bear market.

Young advises that “you should have approximately the percentage of your liquid net worth, equal to your age, completely sheltered from stock market losses.” For example, “if you’re 60 years old, you should have 60% of your money protected against market losses.” Annuities can help you do just that.

Don’t Sell in Down Markets

When the market takes a dive, it’s easy to let fear get the best of you. Jettisoning underperforming stocks may seem like the safest way to cut your losses, but don’t jump ship just yet. Instead, do two things.

First, ensure that your portfolio is diversified. Diverse assets representing diverse industries can mitigate losses if one particular industry or sector is hit especially hard. This setup helps you with “damage control” when your investments perform unfavorably.

Second, hold onto solid companies. Again, your investment strategy should be long-term. A bear market can be a setback, but it’s usually a temporary one. Focus on your long-term goals, and don’t let these sorts of setbacks steer you off course.

How to Start Investing Like a Pro

You don’t need to have a degree in economics to invest like a professional. At Ty J. Young, we help investors develop an investing strategy that aligns with their personal values and wealth management goals. Contact our team today to learn how you can reach your financial potential.