To be honest, when the market falls, every new investor is like a passenger on the Titanic; everyone thinks that the portfolio has sunk. But let me tell you the truth: that is the time when real money is made. Yes, you need a little patience and a little courage, but if you keep your investment, the bear market can make you a crorepati, sorry, in dollars, a millionaire.
In today’s blog, I will explain in simple terms:
- What is the bear market?
- Why do people panic?
- How do smart people make money in the bear market?
- Most importantly, how can you take advantage of this opportunity?
What is a Bear Market?
A bear market is when the market falls 20% or more from its peak. This fall seems scary in the short term, but in the long term it is a golden opportunity.
Think, if you are getting stocks like Amazon, Apple, Tesla on discount… meaning like there is a Black Friday sale in the market. Then what will you do? Will you run away, or will you shop?
Why Do People Panic in Bear Market?
When the market falls, the news channels fire up: “Recession is coming”, “Market crash”, “Dollar is finished”, etc. Then what happens? Retail investors (like you and me) sell their shares out of fear.
FOMO and Panic Selling – The Biggest Enemy
- FOMO (Fear of Missing Out) when the market is going up
- Panic selling when the market is coming down
Both these emotions spoil the investor.
History is proof: Bull Market Always Comes After Bear Markets
Let’s take a little history class:
- After the 2000 Dot-com crash, people who invested saw a 10x return till 2010.
- After the 2008 Financial Crisis, the market started recovering in 2009 and has continuously grown till today.
- The 2020 Corona crash, remember? The market fell in March and almost doubled by November.
What is the Moral of The Story?
A bull market always comes after a Bear market. So if you hold your position at that time or invest more, then profit is guaranteed (in the long term).
Millionaires are Made in a Bear Market, Not in a Bull Market
It sounds strange, right? But it is true, man. People who make money invest it in a bear market and enjoy in bull market.
Warren Buffett’s Rule: “Be Greedy When Others Are Fearful”
When everyone is scared, if you appear a little smart at that time, then you can also become “Buffett Lite” in future. Haha..!!
What should you do in Bear Market?
Now, let’s talk about practical things. A bear market is running or about to come; what should you do?
1. Keep Investing Regularly
Whether it is $50 or $500, keep investing every month. You can’t even imagine how strong the magic of compounding is in the bear market.
2. Focus on Top-Quality Stocks
Like Amazon, Google, Apple, Microsoft, etc. Their business is solid. Fall is temporary, comeback is permanent.
3. Understand Your Risk Tolerance
If you are getting tense by looking at the portfolio every day, then rebalance the portfolio a little. But don’t do panic selling at all.
4. Keep Cash Ready
Cash is king in a bear market. When everyone is selling, you buy.
How Will You Invest in a Bear Market? Take an Example
Suppose you had invested $5,000 in March 2020, when the market was falling:
Then you would have got Apple stock for around $60.
Today, that same stock is trading above $205.
That means 3.4x return in 5 years. Now tell me, what would have happened if you had done panic selling at that time?
Mindset is everything: Emotional Investors Fail
80% of the formula for success in the stock market is mindset. If you are emotionally strong and have patience, then the bear market can become your jackpot machine.
So, Improve Your Emotional Fitness
- Stay away from market noise
- Keep a long-term vision
- Stop checking your portfolio daily
When Everyone Is Scared, Then You Become a Champion
I remember, in 2020, 3 of my friends sold their stocks in panic. I held them and invested a little more. Today, my returns are 5x more than them. This story can be about anyone; just stay in the game.
Conclusion: Short Cut to Become a Millionaire? Stay Invested in Bear Market
There is no shortcut in the stock market, but there is a smart cut: Stay invested.
A bear market is not the end, it’s the beginning of wealth creation.
If you invest a little in every bear market and have patience, then in the next 10 years, you too can become a millionaire investor and that too without showing off.
Bonus Tip: Learning in the Bear Market Is Also an Investment.
When the market is down, then you will get time to learn. Read books, follow genuine finance creators on YouTube, and build your stock knowledge. Just like there is pain in the gym for growth, similarly, there is a fall in the market for wealth.
If you liked this post, then do one thing: Share it with your investor friends, and let us know in the comment below, “I am not going to be afraid in the bear market; I am going to learn!”
See you in the next blog with a new topic. Till then, remember: “The one who invests in fall, the same party later!”