Bear markets are an investor’s best friend. During large stock market declines, you have a better chance of building up a large lead over indexed investors. If your goal is to beat the market in the long run, bear markets play a crucial role, writes Marketwatch.
When the market falls, of course, the odds of you losing money will be high. But to “beat the market” is relative, not absolute.
Theoretically, it is natural that it would be easier to add value during a bear market. This is because you weight up stocks with lower risk or other asset classes that cause your portfolio to lose less than the market itself.
Under beef markets, these lower risk stocks or alternative asset classes will typically be after the market.
Data show that more than twice as many people manage to beat the market during the bear market, as during the beef market, according to Marketwatch.
Follow your plan
During the bear market, sticking to one’s plan is more important than any other time. This can be difficult, since in bear markets you will most likely lose money even if you beat the market yourself. So you will be tempted to change your strategy or even throw in the towel.
If you succumb, the odds of hitting the market in the long run will be far less.
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