Investing In Our Current Bear Market

In order to understand how to invest in our current bear market, one must first understand what a bear market is. A bear market is distinguished by a sustained weak economy that is expected to continue to weaken into the future. Other distinguishing features of a bear market are increased inflation, a rise in unemployment, and falling stock prices. Consequently, bearish markets have an uneven number of buyers and sellers; there are more sellers than buyers. There is a prolonged downward spiral in a bear market due to investor’s shaken confidence in the economy and stock markets. Consumers spend less and less leading to a further decline in businesses profits, which in turn leads to the further devaluation of company’s stocks.

Investing in a bear market is risky because the potential for losses is high. Potential losses are great because the end of the falling stock prices is unable to be foreseen. One strategy for investing in bear markets is to wait for the moment the falling stock prices turnaround. With the wait for reversal strategy, investors may join the bandwagon when profits first start to be made on the stocks. Another strategy for investing in a bear market is to invest in securities or stocks that are not highly volatile. Such securities that are less affected by changes in the market are money market securities, CD’s (provided the interest earned, in one institution, on the CD’s is not more than the FDIC insured amount of $100,000) and fixed-income bonds. Yet another strategy for investing in a bear market is to utilize “defensive stocks,” or those stocks which are only slightly affected by changes in the economy or market. Such defensive stocks include telecommunications, food industry, utilities, and debt collection. Additionally, a selling short strategy as well as diversification of one’s portfolio may prove fruitful in investing in a bear market.

If our current bearish market has you trapped in its downward spiral, the first step in settling your finances may be to repair your credit. If you are serious about tackling your personal finances, please contact the law offices of Smith & Gromann, P.A. by calling toll free 1-800-508-0041 or visit the CreditLawGroup website.