Bear Market

5 Things to Consider During a Bear Market

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During a bear market, emotions may cause anxiety for some as they watch the market valuation of their portfolios decline. However, for others, a bear market is a buying opportunity. The stock market can be volatile and creates both selling and buying opportunities. Here are five things to consider during a bear market:

1. Continue focusing on your goals

Your investment strategy is based on your unique situation and goals. Think about your short-term and long-term goals, then determine if changing your portfolio’s allocation is appropriate. You may find that staying the course and riding out the bear market is suitable for now.

2. Maintain an emergency fund

When the market gets rocky, an emergency fund can help provide peace of mind. Be sure to have at least six months’ worth of living expenses in an account you can access at any time. If you do not have easily accessible cash, you may make decisions based on emotions and fear instead of facts.

3. Consider rebalancing your portfolio

Once you determine which asset classes have deviated from the planned allocation or your financial plan, you may want to rebalance if appropriate. Before rebalancing:

  • First, consider the tax implications that come with rebalancing. While you do not have to worry about taxes with tax-advantaged accounts like 401(k)s, you will be responsible for capital gains tax on taxable accounts. Consult your tax and financial professionals to help you determine how rebalancing will impact your taxes. 
  • Second, determine which strategies to sell in the asset classes that have exceeded the planned allocation.
  • Third, determine if you want to invest in the asset classes that have fallen below your desired allocation, invest in new strategies aligned with your risk tolerance and goals, or stay in cash to invest later.

4. Do not obsess over your portfolio’s performance

Checking your portfolio frequently may do more harm than good if it causes you to make decisions you regret later. Limit the frequency you check your portfolio since it benefits your emotional and financial wellbeing.

5. Evaluate buying opportunities

A bear market may provide opportunities to purchase strategies at lower prices. During bear markets, the stock index companies’ share values, such as the S&P 500, may fall, but not always at the same time or by similar amounts. Your financial professional can help you identify buying opportunities that align with your risk tolerance, time horizon, and goals that are appropriate for your situation.

Speak to a fiduciary advisor

If you are unsure what to do during a bear market, reach out to your financial professional. They can help you understand how your portfolio may be impacted, help you control your emotions, and avoid bad decisions you may regret later.

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.