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Navigating bear markets | Strategies for maintaining investment discipline

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By Capital Partners Markets and Investments

When it comes to markets, experienced investment professionals have witnessed and felt the shift in energy that comes with bull and bear markets. Where a bull market is a sustained stretch of time when prices are rising, a bear market defines a stretch when investment prices are falling. While bull markets can be exhilarating, bear markets can be confronting for even the most seasoned investors. It is during these downturns that true investment expertise shines through. Through discipline and expertise, it is possible to prosper.

Here are five tactics to help make informed decisions and effectively navigate a bear market.

Maintain a long-term perspective

The average bear market lasts less than a year, which is why it’s crucial to maintain a long-term perspective. While sometimes difficult to endure, history shows that markets often recover quickly from a downturn. Resisting the temptation to sell your investments when markets turn volatile is challenging, but maintaining a long-term perspective by avoiding impulsive decisions is one of the most effective things you can do. With so much hype around investment styles, seek comfort in an evidence-based, goals-focused approach.

Evaluate portfolio allocation

Bear markets present an excellent opportunity to evaluate your portfolio allocation. Diversification will be your best friend here as it’s key to managing risk. Consider assessing your holdings and consider rebalancing if necessary. It may be prudent to add assets that have historically performed well during downturns, such as defensive stocks, bonds, or alternative investments, so reach out to a trusted fiduciary should you need support.

Focus on quality investments

In a bear market, the importance of identifying and holding onto quality investments is amplified. Companies with strong fundamentals, robust cash flows, and a track record of withstanding market downturns are more likely to recover and thrive once the market rebounds. How do you feel about research? If you love getting into the nitty-gritty, delve into company research to make an informed decision about your portfolio structure. Alternatively, investment fiduciaries will support you to identify what is best for your objectives, ensuring your portfolio is well-positioned to withstand volatility.

Avoid timing the market

Inevitably, when events turn bleak and headlines warn of worse to come, some investors’ thoughts turn to market timing. The idea of using short-term strategies to avoid near-term pain without missing out on long-term gains can be seductive. However, research repeatedly demonstrates that   Rather than trying to buy at the absolute bottom or sell at the peak, focus on a consistent investment strategy that is aligned with your greater long-term financial goals.

Stay informed but deliberate

Make a concerted effort to stay up to date with the latest news and developments in the areas that are causing volatility. This can help you react appropriately to market changes and know what questions to ask when looking to make informed decisions. At the same time, it’s important to strike a balance and be deliberate about how much news you consume. Coverage of recessions and turbulence is unsettling and repetitive. Try not to be sucked in by doomsday headlines and act out with our emotions. Turn down the news and make a trusted adviser your go-to for educated insight. By remaining well-informed, you open opportunities to make educated investment decisions and capitalise on opportunities as they arise.

Successfully navigating a bear market requires a combination of expertise, discipline, and a long-term perspective. Volatility is a natural part of the market, and while it can be challenging, it can also present opportunities for growth and learning. At every market stage, financial advisers can be invaluable sounding boards to offer support influenced by experience. By staying level-headed and making informed decisions from experts, not headlines, you can navigate periods of volatility and come out stronger on the other side.

If you would like personalised guidance on navigating a bear market or have questions about your investment strategy, our experienced team of investment professionals is ready to assist you. Contact us today to help you achieve your financial goals.

Remember, investing involves risks, and past performance is not indicative of future results. Seek professional advice before making any investment decisions.

The information provided on this site is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different and you should seek advice from a financial planner who can consider if these strategies and products are right for you.

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