Other Things to Consider in a Bear Market
Timing the Stock Market Is a Fool’s Game
Here’s what you need to know: there is absolutely no way to predict what the market will do next. Anyone who thinks they can do it is speculating. And just like with gambling, sometimes they’ll be right and sometimes they’ll be wrong.
These speculators believe they can time the market. And the problem with timing the market is that it can set you up to make an all too common mistake that can sabotage your efforts to build wealth: buying high and selling low.
If Warren Buffett doesn’t time the market and considers his time horizon when buying stock to be forever, why should the average investor not do the same?
Successful market timing requires you to be right twice–once when you sell, and once when you buy. And over the lifetime of an investor, you must be correct over and over and over again. Good luck with that.
What If I’m Hoping to Retire Soon?
Regardless of whether we’re in a bull or bear market, you should have a healthy emergency fund stacked up to protect you against fluctuations in the market and major changes in life. Once you’ve done that, you should make sure your portfolio is well-diversified. Finally, just because you’re diversified doesn’t mean you have to take on a huge amount of risk.
If you’re close to retiring (early or not), you should adjust your asset allocation based on your risk tolerance and runway to retirement. So basically, if you’re retiring in a couple of years, you may want to lean more heavily on safer investments like bonds.
The truth is, we can’t predict a bear market, nor can we predict what will happen. But what you need to do is prepare for it, and make sure you stay the course, if not increase your investment efforts. A bear market is an amazing opportunity, despite what it sounds like.
The financial headlines can be scary. Yet, you can take steps now to be proactive during a stock market crash. If it does take a tumble, remember not to panic and think long-term. This way your can stay the course and keep your finances in order during the short-term.