The three fundamental truths of a bear market.
1.) A bear market is only bad if you plan on selling your stock or need your money immediately.
2.) Falling stock prices and depressed markets are the friends of the long-term investor.
3.) You must learn to separate the stock price from the underlying business. They have very little to do with each other over the short-term.
So what do I do with my money in a bear market?
The first thing you need to do is to look for companies and funds that are going to be fine ten or twenty years down the road. If the market crashed tomorrow and caused Gillette’s stock price to fall 30%, people are still going to buy razors. The basics of the business haven’t changed.
When you understand this, you will see falling stock markets like a clearance sale at your favorite furniture store… load up on it while you can, because before long, the prices will go back up to normal levels.
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