Investing 101: In Bear Markets, Conserve THIS and Your Cash

There's an old stock market saying that goes:

"There are old traders. There are bold traders - but there are no old, bold traders."

It's a good phrase to keep in mind these days.

Bear markets are to investors what a hydraulic pressing machine is to rubber toys and other household objects, in one of those weird, mesmerizing videos on TikTok...

In other words, our "boldness" gets squeezed again and again by the downward nature of the stock market and the crisis du jour.

Pretty soon, our interest and ability in taking risks - essential for any investor or trader - gets pressed out of us until we're a quivering, gelatinous mass of doubt, confusion and apathy.

Anyone want more jello? Hmmm, I didn't think so.

What's the Solution?

I remember how it was during the 2007-2009 bear market. It was crisis after crisis. Hometown banks collapsing, investment banks going bust. The credit markets seizing up.

By the time the bottom arrived, amid a tidal wave of easy money rescue programs, no one cared.

So the solution is two-fold:

#1: Conserve cash

That means selling losing stocks. Don't make the mistake of riding them to even deeper losses because "it can't go down much more than it has already."

Cash, in my opinion, is our friend in a bear market. I get the advantage of getting paid higher interest rates to keep it on the sidelines. It also gives me options so I can take action at a time and place of my choosing, instead of just taking the punishment that the bear market dishes out.

#2: Conserve your patience.

Seriously. Half the battle in a bear market is avoiding the temptation that you have to do something.

I know that temptation well.

We all watch our portfolios get smaller in a bear market (unless we're shorting or using options). The losses can be small or large. The atmosphere is increasingly pessimistic. It's natural to feel the urge to "take action" and try to make back those losses.

But doing so successfully and consistently, in a bear market, is like trying to swim up a river. You're going against the current. Maybe you'll get to your destination. But the odds say you'll get tired and drown first.

One reason the goodBUYs portfolio is ahead of the market isn't only by religiously cutting losses and letting winners run (and we've had some good winners, believe me). It's also because we've become more patient, trade less, and carry large cash levels:

Occasionally if I see a potential rally setting up - like I did in early January - I'll alert premium subscribers and launch a flurry of trades.

But when the market is struggling like it is now, with no end in sight...there's nothing wrong with trading on a more limited and strategic.

Remember, the smaller the hole (of losses) we dig now, the easier it is to climb out of later, when market conditions improve for the next rally or (gasp) bull market.

That's why we need to conserve our patience - as well as our cash - in this bear market. Otherwise, our risk-taking genes could be crushed flat as this downturn runs its course.

Best of goodBUYs,

Jeff Yastine