A bear market refers to a steep decline in the prices of securities by 20% or higher from their recent peaks. While markets rebound in the long run, bear markets bring extreme uncertainty and panic for investors. On average, bear markets happen every 3 years in India. So, if you find yourself in the midst of a bear market, you need to understand what strategies and techniques you can use to survive the bear market. This article outlines 6 techniques to survive the bear market and reap the benefits of future market rallies.

• Maintaining a defensive approach and diversifying holdings can help tackle bear runs.
• Consistently investing through SIPs helps cash in on rupee-cost averaging and good long-term returns.
• Bear markets offer strategic investment opportunities to identify and purchase undervalued assets at low prices.

If you are worried about bear markets derailing your investment plan, here’s a list of 6 techniques you can implement to survive the bear market:

Maintain investment consistency

Maintaining a consistent investment approach is the best technique to survive the bear market. If you have mutual fund SIPs, refrain from halting or withdrawing your investments during bear phases. Instead, keep investing a fixed sum regularly. SIPs work on the principle of rupee-cost averaging. So, when the markets are down, you can purchase more MF units and potentially sell your holdings at a higher price once markets recover. Consistent investing can offer efficiency when markets are falling.

Diversify

Another technique to survive the bear market is diversification. Spreading your investment across stocks, bonds, gold, and alternative assets helps attain the goal of diversification. How you allocate resources to different assets depends on your goals, risk appetite, and investment horizon. However, implementing diversification early helps minimise the risk of putting all your eggs in one basket, especially when markets are falling.

Avoid knee-jerk reactions

One of the best techniques to survive the bear market is to avoid knee-jerk reactions. While it can be tempting to liquidate your position at the first sign of trouble and cut your losses, doing so can compromise your yields. By selling your investment when the market is falling rapidly, you risk locking in permanent capital loss, which hampers your long-term returns. If you sit on the sidelines while the market recovers, you miss out on the major rallies as the market walks the path of recovery. Therefore, it’s crucial to avoid emotionally driven and panicked knee-jerk reactions to survive the bear market.

Find strategic opportunities

Bear markets are not always negative for investors. The trick is to know what to look for. In fact, bear markets present a goldmine of opportunities for value investors who can select underpriced stocks. Following Warren Buffet’s investment approach, value investors can identify undervalued stocks with strong fundamentals. In simple words, you have a chance to invest in some good companies at bargain prices due to the general market decline. You can sell the stocks at a potentially higher price once the market rebounds and recognises their actual value.

Consider defensive industries

Investing in defensive stocks is another good technique to survive bear markets. Defensive or non-cyclical stocks belong to industries that produce essential goods and services like consumer staples and utilities. Given the essential nature of their products, the company’s demand remains relatively unaffected by market downturns. Therefore, defensive stocks are known to offer consistent dividends and stable returns regardless of the market conditions.

Stick to your long-term financial plan

Refocus your attention on the long-term goals of your investment plan. Try reminding yourself about why you started investing in the first place. For instance, if you’ve invested for a retirement corpus, withdrawing your investment in a bear market today will compromise your long-term earning potential. Remember that markets tend to recover in the long run. Therefore, patient and disciplined investors who remain invested for the long term are more likely to reap the benefits of market recoveries. Focusing on your long-term objectives will reduce the urge to make emotionally-driven impulsive decisions.

Bear markets are an inevitable part of market cycles. But bear markets don’t last forever. The market rebounds, and bull runs return. If you want to benefit from market-linked investments, you will have to learn how to survive bear markets. It is wise to use the techniques listed above to survive bear markets and formulate a definite strategy for the same so that you can avoid the temptation of selling low.

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