How to survive in the bear market?  Tips for beginners

How to survive in the bear market? Tips for beginners – Mail Bonus

Bear markets usually cause every investor a sense of uncertainty. Even more so for newcomers, for whom it may feel like the end of the world. It may even be common knowledge that while in bullring, investors are sure to make a profit. Meanwhile in bear markets like these, indescribable pessimism comes.

Kylin Network co-founder and strategic leader Dylan Dewdney told the Cointelegraph that the two biggest mistakes investors make while experiencing anxiety are “One, overinvestment and two, not investing with conviction.

“You need to find the year of love where you have enough conviction in your investments while managing the money spent on them so that you are 100% happy to be patient for a long time. “Finally, there are bear markets where the magic really happens – buying Ether for $ 90 in December 2019, for example,” said Dewdney.

According to data from blockchain analytics firm Glassnode, traders traded nearly 43,000 trades in cryptocurrencies in early May. This amounted to 3.1 billion dollars worth of Bitcoin. But the panic that caused these calls came from the collapse of Terra, which caused the market to fall even further.

Bear markets occur when there is a general decline in asset prices, by at least 20%, from their last highest. For example, the current bear market Bitcoin (BTC) has fallen by more than 55% since the record in November, $ 68,000. Bitcoin is currently trading below the $ 25,000 mark at the time of writing.

Bear markets: Origin, severity and duration

Bear markets are often tied to the world economy, according to Nerdwallet. That is, they occur either before or after the economy goes into recession. Where there is a bear market, there is either a continuing economic collapse or an impending one.

In general, the persistent fall in prices from recent highs is not the only indication of a continued bear market. There are other economic indicators that investors still need to take into account. This is to enable them to learn whether the bear market is playing or not. Some indicators include interest rates, inflation and the employment rate or unemployment rate.

However, the relationship between the economy and the bear market is even simpler than that. When investors notice that the economy is shrinking, there are widespread expectations that corporate profits will soon begin to decline as well. And this pessimism causes them to sell their assets and thus push the market even lower. As Scott Nations, author The Anxious Investor: Mastering the Mental Game of Investmentsays, investors often react too much to bad news.

In all cases, bear markets are shorter than cattle markets. According to a recent CNBC report, bear markets last about 289 days. Cattle markets, on the other hand, can even exceed 991 days. In addition, the Invesco data analysis report states that the losses associated with bear markets are on average 33%. So, downsides are usually not as effective as the average profit of 159% of the bull market.

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While no one knows for sure how long a bear market could last, there are some tips on how to resist it.

Sailing around the bear market

As an investor, there is probably nothing that anyone can do to prevent an unfavorable market situation or the economy as a whole. Nevertheless, there are plenty of potentially great actions one can take to protect one’s investments.

Dollar cost on average

The Dollar Cost Average (DCA) describes an investment strategy in which an investor regularly buys a fixed amount in dollars of a particular asset, regardless of the price of that asset in dollars. The policy is based on the belief that over time, prices will generally increase in speed and eventually rise during a bull run.

CoinShares’ head of research, James Butterfill, told the Cointelegraph that Bitcoin now has a well-established inverse correlation with the US dollar:

The symbolic bear and the bull in front of the Frankfurt Stock Exchange. Source: Eva K.

“This makes sense due to growing value properties, but it also makes it incredibly sensitive to interest rates. What has pushed Bitcoin into a “cryptic winter” over the past six months can largely be explained as a direct result of the Fed’s ever-hawkish rhetoric. The statements of the Federal Open Markets Committee (FOMC) are a good indication of this and we can see a clear connection with the time of issue of the statements and price changes. “

When this sensible investment approach is taken into account, the average purchase price of investors over time. That is to say, one can enjoy the benefits of buying the dip and also avoid investing all the pension savings in a high market. After all, as scared as bear markets are in the investment world, they are also the best times to buy cryptocurrencies at the lowest prices.

Diversify your portfolio

For investors who have a wide range of assets in their portfolio, the impact of bear markets could not be as serious. When bear markets are in full swing, property prices generally fall, but not necessarily by the same amount. So, this valuable policy ensures that the investor has a mix of winners and losers in their assets during the bear run. Thus, the total loss of the portfolio will be reduced to a minimum.

Consider defense assets

In protracted bear markets, some companies (mostly smaller or younger) get tired along the way. But other well-established companies with stronger balance sheets can withstand difficult conditions for as long as needed.

Therefore, anyone who wants to invest in corporate stocks should go for the stocks of companies that have been trading for a long time. These are defense stocks. And they are usually more stable and reliable in the bear market.

Bonds

Bonds can also give the investor some relief during the bear. This is because bond prices usually move against stock prices. So bonds are a key element in any near-perfect portfolio, giving investors relative ease in the bear market’s pain.

Mutual funds or stock exchange funds

It is known that some industries are thriving in a downturn in the market, including the utilities and consumer goods sectors. And more than any other sector, they can go out of their way to give them the name “stability assets”. Investing in the industries mentioned above through index funds or stock exchange funds (ETFs) can be a smart move. This is because each index fund or ETF owns shares in various companies.

Play blinds

There is no doubt that bear market will tempt investors to run and never look back. Also will test their will and endurance. But as history has shown, bear markets do not last forever, nor does the current one.

According to the Hartford Funds, more than 26 bear markets took place between 1928 and now. And each and every one of these bear markets was immediately followed by a cattle market, which brought in more than enough profit to make up for the losses that might have been incurred.

So it is important to always keep in mind the prevailing downturn, especially if you are investing for the long term, such as before retirement. Eventually, the beef markets you will witness along the way will surpass the bear markets.

Final decision

As previously explained, there are high risks associated with bear markets. But they also offer a good foundation for success in the next bull run. However, it depends on a good strategic investment plan mixed with patience. So you can guarantee profits when the market finally turns around, whether you’re always DCA-ing, spreading to other assets, investing in ETFs and index funds or stocks.

Losing money is always a difficult pill to swallow, but the best way to get through a recession is not to run. Instead, divert your thinking to good things in life, such as recovery and recovery.

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“Although Bitcoin’s price performance has been weak in light of the aggressive central bank, this current pause in price performance could very well be short-lived. We believe it is very likely that the central bank will make a policy mistake as the price of Bitcoin is likely to deviate from rising equities. At the same time, it is likely that the former will benefit from a lower central bank and a weaker USD, while the latter will withstand a contraction or stagnation, “says Butterfill. He added:

“Unfortunately, we believe it is likely that the United States and the rest of the world will go into recession in 2023, although much is unknown. Maybe it will be stagflation that will then turn into a recession? Since the liquidity trap really takes hold of central bankers, we believe that Bitcoin is a good collateral in the face of this confusion of monetary policy.