February 21, 2022, 11:50 am EST
Bear Market Investment
Investing in the bear market is much harder than a bull market where most stocks are going up. In the bear market, only small portions of stocks are able to survive. Furthermore, they may be able to climb uphills by facing strong winds against them. They are certain characteristics that other stocks do not have. In this article, we list four categories for us to study: money-saving, survival mode, inflation-driven, and fixed income. Please apply the same disciplinary by cutting the loss at your pre-defined level if the stock does not go up as expected so that the loss is minimal.
When the bear market arrives, most people will feel the pain. Saving money by buying from lower-cost stores, eating less from the restaurant by using more containers may become essential steps during the financial storm.
- Discount Retailer: DLTR
- Packaging / Container: NWL, SEE
When the situation becomes harder, survival mode would be turned on for food-related stocks because its business is necessary to exist regardless of the market condition. People do not need to buy Oculus Quest VR headsets for survival. But, the need for food will always be there. Also, the demand for medical products is going to get stronger and higher during this difficult time. Lastly, the insurance companies are likely to do well during the bear market
- Food: KHC, SYY
- Healthcare: HSIC
- Insurance: RE, WRB, AIG, CB
Since the trouble of the financial is based on inflation, these commodities are likely to outperform others until the rates began to turn down.
- Basic Material: AA, NUE, STLD
- Precious Metal: NEM, GOLD
- Energy: WES
Although the dividends may be cut or the underlying stock price may go down, high dividends are still attractive choices to provide income during the bear market. Recently, there are covered-call ETFs available that provide double digits (12%) dividends return annually. They still carry risks but they are worth attention.
- High Dividends: ZIM (14%), MO (+7%)
- Covered-Call ETF: RYLD, QYLD (12%)
In principle, most traders and investors are going to be losers during the bear market because they keep betting the market or stocks would go up with their timing. Unfortunately, the market will prove that they are wrong by getting lower at the expected pace and events. Therefore, it is important to stay calm and conservative by protecting your assets and making steady upwards in your portfolio. You do not need to be fast but the winners are those who can laugh at the end of the bear markets.