Practical Investing Strategies for a PA During a Bear Market (Example: The COVID-19 Pandemic)

When you are investing your hard-earned income (likely in a retirement account), it is rewarding to see the amount increasing over the years. Then, bam!, a bear market smacks you right in the face. This can make you feel nervous, afraid, and even second-guessing your initial plan of investing. However, allow me to attempt to ease your concerns. 

This article is being composed during the COVID-19 pandemic, which has caused a bear market. What is a bear market? A bear market is often defined as a period where the market prices fall by at least 20% from the recent high. Many are hoping that this will be a “V-shaped” bear market, meaning a sharp decline in the market followed by a sharp recovery shortly thereafter. However, no one can predict the future. So, what are we to do during a bear market when it comes to investing? 

Don’t Touch Your Face. Don’t Touch Your Investments. 

This is an excellent mantra for the COVID-19 pandemic. Repeat it aloud about three times in a row. It’s supposed to be a little humorous (feel free to chuckle – you know you want to!), yet also insightful. Allow me to explain… 

Clearly during the COVID-19 pandemic, we in healthcare along with the rest of the world are doing our absolute best not to touch are faces to reduce transmission risk of the virus. However, are just as many people not touching their investment accounts? Doubtful. Why is that? Again, because people are seeing the stock market plummet, which leads to fear, concern, doubt, and many more negative emotions. These feelings make people wonder if they should pull their money out before the market plummets further. However, in doing so, you are attempting to time the market, thinking that you know when a good time to sell would be. Again, no one can predict the future, so it’s best not to attempt to time the market. Does anyone know if the market will or will not fall even more, or all of a sudden increase again? Nope. 

Don’t Look at Your Portfolio If You Are Tempted to Sell 

Maybe the best advice for you is to not even bother looking at your portfolio if you are considering selling everything. I did decide to look at my accounts because I have been learning more about investing and financial independence over the past several months. This gave me the confidence to not react by doing something unwise. Between my 401(k) and my HSA, I lost approximately $20,000 within a few weeks. That’s real money out the window! However, if you are one that losing many thousands of dollars would upset and cause you to sell, perhaps you just should not even look until several months down the road. 

View the Market as Being on Sale!

Although I lost several thousands during the beginning of the bear market, I did not lose the actual shares that I owned. I still owned the exact same shares in the exact same companies. So, when the market recovers, those prices will increase, thus increasing my total portfolio. This is why it is best to hold instead of sell during a bear market. 

Additionally, if you’re able to, you can buy more stocks during a bear market and get them for “sale” prices! You should at minimum continue to invest regularly into your accounts. A portion of each of my paychecks automatically goes straight into both my 401(k) and my HSA, which I did not change during this bear market. If any other items are on sale (clothes, cars, purses, shoes, food, etc.), people get more excited and inclined to purchase the item. However, if the market is “on sale” during a bear market, people get afraid to put their money into something where the value just dropped. This can make them miss out on the recovery and probable bull market in the future. What is a bull market? Well, it’s the opposite of a bear market, and is a time where the market share prices are climbing. This is when your investments really gain momentum and accumulate in value. 

Recognize That Your Investing Timeline Is Likely over the Course of Many More Years 

If you are a younger PA, your investing timeline is likely over the course of many more years. This bear market is a “blip” so to speak in your investing course. Your portfolio has much time to recover, as well as thrive, during future bull markets. 

The Market Always Goes Up (And Always Goes Down, but the Trend Is Up!)

This may seem scary. This may make you wonder why anyone would ever consider placing their money into the market. You WILL see many more bear markets over your investing life. This is a fact of life. However, you also very likely will see many more bull markets as well. Although this makes investing in the market sound more volatile than just hoarding your cash in a bank, recall that the market has crashed several times since the early 1900s, and the market always climbs back up, and rises higher to what it had previously been. 

Invest in Low-Cost Broad-Based Index Funds 

Perhaps you are now convinced to not sell your shares during a bear market, but what should you invest in? One of the best things to invest in during highs or lows of the market is a low-cost broad-based index fund. What are these, and what are the benefits? Low-cost broad-based index funds are somewhat self-descriptive. The fees are low (low-cost), and they cover many companies in the stock market (broad-based). This makes investing inherently easy as you do not have to pick certain stocks from certain companies. Rather, you own a small piece of many companies! Investing in these are like putting your investments on autopilot. 

To conclude, I hope this information served as a bit of a pep talk to encourage you to keep on keeping on when it comes to investing, even during a bear market. If you were to sell when the market is low, when you are “ready” to buy again, you may have to pay a premium price for the exact same shares that you had sold. Instead, try to continue on the course, hold steady, and remember: Don’t touch your face. Don’t touch your investments. 

What have your experiences been in investing during bear markets? Did you stay the course? Or did you sell low and buy high? Do you have further recommendations for other PAs trying to invest during bear markets? Leave them in the comments! 

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