Are you afraid of bears? The term we hear alot these days is bear market. Today, I want to talk about it and why and how it can be your friend.

First, what is the definition. According to CNBC and Goldman Sachs,

• A “bear market” is when stocks see a 20 percent decline or more from a recent high — but they’re also marked by overall pessimism on Wall Street.
• Since World War II, bear markets have lasted 13 months on average, and stock markets tend to lose 30.4 percent of their value.
• During those conditions it usually takes stocks an average 22 months to recover, according to analysis from Goldman Sachs and CNBC. https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html

Psychological effects

The psychological effects is primarily fear. In a bear market, people become fearful and pessimistic. They see the value of their investments decrease. They become fearful and pessimistic. The prices keep dropping.

The bears of the market will surely predict Armageddon. Media and the experts will all jump on board. Be ready for this.

A bear market can be a good thing

Why? If you’re a 20-35 year old person, you have 30 – 45 years left for your retirement. Imagine for a moment, it’s summertime and it’s 80 degree weather outside. You walk in a store and in the back on a rack, there’s the winter coat on sale that you’re dying to buy last winter but it was sooo out of your budget. Now, next winter you’re going to need a coat. Would you buy it? Some people would say “but it’s 80 degree weather!” The simplygettingrich person would say “it’s 30% off!” Of course, I’ll buy it. Think of bear markets as stocks going on sale.

Conventional wisdom says that your stocks that you already have will go down. They’re right. However, look at it this way. A bear market allows you to lower your cost. For example:

Your investments before bear market: $5000 (SPY: $293.54*17.033 units)

Bear market lowers 30%: $3500

You invest $1000 (SPY:$205.48 *4.86 units)

Average cost: $6000 ($274.10*21.89 units)

Because you boought, the average cost of your investments have gone down.

A bear market allows you to lower your costs. Over time you it will pay you for your patience and your discipline.https://gettingrichsimply.com/when-to-invest/

As the late president FDR once said, “You have nothing to fear but fear itself.” In reality, people, overall, get caught up in the media hype. They don’t have a long term vision but hear the doomsayers. The essence of gettingrichsimply is to block out the noise and focus on the long term and how we can benefit from the situation now. Remember, the people who will be getting rich are the ones who will be exploiting the conditions of the day. In other words, make a plan for the long term.

Looking to the past, to profit from the bear market

Winston Churchill is quoted as saying “He who does not know the past is condemned to repeat it.Everybody has an opinion but no one has a crystal ball. We know that the market like the economy folloes in cycles. We don’t know for how long or when they come about. However, what is important is that we don’t fall into the trap “this time is different”. As a gettingrichsimply student, we must keep our eyes on the prize.

Conclusion

What is a gettingrichsimply person these days suppose to do.

• Have a plan

• Control your fear

• Block out the noise (media, doomsayers etc)

• Invest bit by bit

• Look to the past for reassurance

• Have a long term vision (keep your eyes on the prize)

As usual leave me your comments or questions

Rich Simply