How to invest in a Bear Market?

So you want to know, How to invest in a bear market? Like it or not, the US Stock market and much of the world’s markets are in a Bear Market. So How do you invest for profit in a Bear Market?

Cash is trash.

The US dollar may be doing better than other currencies in the world right now, but that doesn’t mean it is not losing purchasing power. Other countries are being forced into buying US treasuries because of political uncertainties and because of debt being required to be paid back in US dollars. But the dollar is losing its value domestically.

Growth Stocks are not growing!

With the Fed raising interest rates to offset inflation and the threat of a recession or even as some say a greater depression, Growth Stocks are in decline. And all the “Risk On” assets are losing value currently in the market. That includes: Facebook (META), Amazon, Tesla and the Cathy Wood’s crowd of investments.

Where is your money most safe?

Where in the stock market are you most likely to lose the least and profit the most? Growth stocks decline most in a bull market, especially speculative ones. But what about Blue Chip dividend-paying stocks? We are living in a strange time where two counter-intuitive forces are at work at the same tome, Deflation and Inflation. Some things are going up in price while other things are falling because of stagflation.

How Stagflation affects the market.

Because people will buy what they need and not what they want. This drives some prices down and other prices up down. In sectors that can’t make a profit, there will be layoffs. This event could drive us into a deep recession or a depression.

How to invest in a Bear Market? You could profit from falling growth stocks.

Most people know how to make money when a stock is going up. But you can make money when a stock goes down when you short that stock. Beware, there is no amount to how much you could lose if you short a stock and it keeps going up. Shorting stocks requires renting a stock for a fee and you immediately sell that stock for the market price, hoping to buy it more cheaply in the future when you return it there by making a profit on the spread.

Does shorting stocks seem too complicated for you?

If so, don’t worry you can buy an ETF that invests in shorts. My favorite is the SQQQ, Pro Shares Ultra Pro short QQQ. This fund performs inversely to the Nasdaq-100. The opposite of this fund would be the TQQQ, which uses leverage to get a 3x return on the growth of the Nasdaq-100. Both of these, Short and Long positions could be Day-Traded, back to back or swing traded. But to do this, you need a good understanding of the momentum of the market. And knowing when to sell your shorts and longs could mean making a. profit or going broke.

Day-Trading, not your thing?

Then invest in things that will rise long term regardless of the market. What do people need? Food, Shelter, Power. You could invest in grocery stores like Kroger, stock symbol KR. Kroger stock pays a dividend too. But whether you are buying XOM, Exxon Mobile or BTU, Peabody Coal. You want to know what price the stock is trading at and is it based on an emotional high or actual earnings and strong performance?

Don’t lose your shirt.

In Bear Markets, you want to profit when you can, but conserve your capital when there are no good options. Take Jim Rodgers advice.

One of the best rules anybody can learn about investing is to do nothing. Absolutely nothing, unless there is something to do… I just wait until there is money lying in the corner, and all I have to do is go over and pick it up… I wait for a situation like the proverbial “shooting fish in a barrel.” -Jim Rodgers.

How to invest in a Bear Marker? Study the Market and Study Stocks.

The best thing you can do is to educate yourself. Be financially suave and don’t put all your eggs in one basket. Don’t get involved in trades that you don’t understand. And ask a lot of questions. Because the worst thing you could do is follow a hot tip about a stock or industry, you don’t understand and watch it fall a few points a sell at the wrong time.

Conviction Plays a big role.

Do you believe in an industry or sector or company? And why do you? Don’t base your belief on hunches. What are the market trends and core factors in the world that will cause this stock or industry to grow in the next 5-10 years? And if you have conviction or a trading or investing strategy, it will enable you to pick up bargains when the markets pannick. Because down turns in stock prices can be a great long term buying opportunity.

Want more on this topic?

Check out my blog about investing in troubled times. Click Here.