Optimism is typically in short supply and shrinking fast during bear markets. But it shouldn’t be. If history is a guide, optimism should be rising.
Because every stock market crash in the U.S. recovered. Every recession in this country turned into a growing economy. Every bear market ended. So there’s room for optimism.
Of course, bear markets have a greater impact on your overall returns than any bull market will. Especially, if you abide by the philosophy that the lowest average cost wins.
Bear markets allow opportunistic investors to average down. It’s future wealth creation at its finest.
Every incremental decline in the stock market is another opportunity to buy at lower and lower prices which increases your chances of a higher return in the future.
The dollar-cost averagers out there already take advantage of this, whether they know it or not. But if you’re sitting on cash, waiting for a signal to go all-in in this market, you won’t find it. Those things only show up in the rearview mirror long after the opportunity has come and gone. It’s best to pick your moment, commit to it, and average in.
Break your cash position into chunks, and buy a little each month — whatever you’re most comfortable with — until it’s gone. That way, if you’re wrong about the bottom — which you will be — your money goes further. You buy more shares as prices fall. And in turn, you lower the average cost of each position in your portfolio.
The art of surviving a bear market is courage, patience, and humility. The courage to look wrong while buying into a falling market, the patience to wait for the eventual recovery, and the humility to know that you won’t time the bottom. That is what sets successful investors apart.
The most successful investors agree. They’ve shared a similar view over the decades and some other helpful tips on how to survive bear markets:
Every economic recovery since World War II has been preceded by a stock market rally. And these rallies often start when conditions are grim. — Peter Lynch
***
One of my life principles is that the only way you can live life is by dealing with what is, and not with what might have been. So that’s the way I’ve tried to deal with setbacks. — John Bogle
***
The most important lesson an investor can learn is to be dispassionate when confronted by unexpected and unfavorable outcomes. — Peter Bernstein
***
“This one is different,” is the doomsayer’s litany, and, in fact, every recession is different, but that doesn’t mean it’s going to ruin us. — Peter Lynch
***
It’s absolute cockamamie crazy to sell stocks after they drop. Instead, you should say, “Today there’s a first-rate bargain and I’m buying.” — Charles Ellis
***
Discrepancies — and hence opportunities — in securities originate most often when events move faster than quotations. — Benjamin Graham
***
People who exit the stock market to avoid a decline are odds-on favorites to miss the next rally. — Peter Lynch
***
If you can invest your money under fair conditions, in fact under attractive specific conditions, I think one certainly should do so even if the market should go down further and even if the securities you buy may also go down after you buy them. — Benjamin Graham
***
I’ve found that when the market’s going down and you buy funds wisely, at some point in the future you will be happy. — Peter Lynch
***
Survival as an investor over that famous long course depends from the very first on recognition that we do not know what is going to happen. We can speculate or calculate or estimate, but we can never be certain. — Peter Bernstein
***
Experience in former markets indicates that just as they are too high in bull markets, they get too low in bear markets. — Benjamin Graham
***
In investing, nothing is certain. The best investments we have ever made, that in retrospect seem like free money, seemed not at all that way when we made them. — Seth Klarman
***
As soon as you realize you can afford to wait out any correction, the calamity also becomes an opportunity to pick up bargains. — Peter Lynch
***
After a stock market decline, people may perceive more risk than before when, in fact, the decline may have taken some of the risks out of the market. — Robert Shiller
***
Most people who have been really successful in the securities markets say the same thing — that they’re not smart enough to get into the market and out of it. So they tend to remain more or less in the market at all times. — Walter Schloss
***
My experience is that when people want to give something away at a ridiculous price because they have to, not because they want to, that’s a good time to buy. — Seth Klarman
***
I am an exponent of the philosophy that the main objective of common stock investment should be pricing, not timing; and by pricing I mean the endeavor to buy securities at prices which are attractive, letting timing take care of itself. — Benjamin Graham
***
We consider for each of our investments not only whether a security is undervalued but why it is undervalued. If the reason is that there are uninformed or emotional sellers, we become more comfortable. — Seth Klarman
***
The general state of business thus does not forecast the course of stock prices except in the apparently paradoxical fashion that great prosperity affords an advantageous time for selling stocks, extreme business depression an opportunity for purchase. — Philip Carret
***
The first task of the bargain hunter is to narrow the field and separate the solid prospects from the ones that are counting on hopes, prayers, and miracles. — Peter Lynch
***
It’s good to buy a large company with fine businesses when the price is beaten down over worry about one problem. — Henry Singleton
***
The very existence of doubt creates the conditions for a big gain in the stock once the fears are put to rest. The trick is to put your fears to rest by doing the research and checking the facts — before the competition does. — Peter Lynch
***
Sound common stocks, bought at sound prices, are always good investments. — Benjamin Graham
Check out more bear market quotes.
Related Reading:
The Upside of Bear Markets
What Dollar Cost Averaging Did In The Lost Decade
