- Step 1: Don't buy stocks on margin, which means buying them with borrowed money. This is always risky, but more so in a bear market, when stocks tend to decline due to a sluggish economy.
- Step 2: Buy currencies of mature economies, which may increase in value during a bear market because they often stay more stable during periods of decline.
- Step 3: Buy stocks now at limit price below market, which means placing an order to buy stocks if and when they fall to a certain price. These orders come with a time limit.
- Step 4: Sell any emerging-market stocks, which often do poorly when the world economy is suffering.
- TIP: One rule of thumb is that the percent of your portfolio invested in bonds should match your age.
- Step 5: Buy small-cap stocks, also known as emerging-growth stocks, which tend to go up in a bear market because they are not owned by mutual funds.
- Step 6: Buy initial public offerings, known as IPOs. In a bear market, only the most financially sound companies have the luxury of going public.
- Step 7: Sell your mutual funds, which tend to drop in a bear market because everyone is selling the same stocks.
- Step 8: Play it safe with bonds and dividend-paying stocks, which usually offer steady returns.
- FACT: After the 1929 stock market crash, stocks did not return to their pre-Depression levels until 1954.
You Will Need
- Stocks at limit price below market
- Small-cap stocks
- Dividend-paying stocks
- Currency of developed countries