8 Ways to Stay Safe Around Stock Market Bears

Beware of the sleeping (market) bear.

Seeing a wild bear can be a special treat for national park visitors, according to the National Park Service’s website. While investors probably wouldn’t categorize a stock market bear as “a special treat” — although buyers may think so — they can learn a lot about navigating bear markets from the park service’s advice on bear encounters. Consider these eight tips on bear safety that apply equally well to stock market bears and their cousins in the wild.

Identify yourself.

The park service tells hikers who see a bear to identify themselves by speaking calmly and standing still. Investors facing a stock market bear would be wise to do the same. When market downturns make you nervous, recall your financial plan and why you invest. “Disconcerting as they can be, bears are normal inhabitants of the forest and not elusive like Bigfoot,” says Andrew Crowell, vice chairman of D.A. Davidson & Co. Wealth Management in Los Angeles. “Anticipating and expecting bear markets should be a part of every investor’s financial plan.” When the market turns bearish, hold your ground and trust your financial plan to see you through.

Stay calm and stand your ground.

Bears may try to bluff their way out of an encounter by charging then turning back at the last moment. If this happens, the park service says to stand your ground. Bear markets can be ridden out in much the same way. “Historically, bear markets have always passed as resilient and innovative economies and companies find ways to navigate downturns,” Crowell says. “As earnings rebound and growth resumes, share prices have typically rebounded as well.” Rest assured that this bear market, too, shall pass. In the meantime, the park service says to “never imitate bear sounds.” Don’t imitate the bearish herd by selling your investments when others start to flee the market.

Don’t run.

“As much as attempting to run away from an actual bear is dangerous” — they can outrun a racehorse both uphill and down — “so is trying to escape from a bear market,” Crowell says. It’s tempting to time the market by running away at the first sign of trouble, but the challenge in this strategy is you have to be right twice: “Once to know when to get out and again to know when to get back in,” Crowell says. Failing to do the latter can cause you to miss out on the rebound when the bulls return.

Store your food out of reach.

Campers who venture into bear territory know that nothing invites bear company like food. Allowing a bear to access your food will only make the situation worse, says the park service. The same holds true for investors: “Always keep your living expenses and other necessities for daily life safely out of harm’s way,” Crowell says. “Depending upon resources and risk tolerance, it may be advisable to have a minimum of one to two years’ worth of living expenses in a reserve account away from market volatility.”

Do not drop your pack.

While it can be tempting to drop your pack to make running for the hills easier or to distract your bearish foe, the park service says to keep your pack on. It can “provide protection for your back and prevent a bear from accessing your food,” it says. Replace “pack” with “financial plan” and investors would do well to follow the same advice. Unless your goals have changed, there’s no reason to alter your financial plan. When bear markets make your sell finger itch, just remember your long-term goals and how your financial plan is designed to help you achieve them despite bear markets.

Pick up small children.

The park service tells hikers who encounter a bear to “pick up small children immediately.” Investors who encounter a stock market bear could benefit from doing similarly. Market downturns can be a great time to add to long-term investments. If you have a 529 college savings account or other investments intended for your children’s futures, consider contributing a little extra during stock market declines. Think of it as a back-to-school sale for your kids’ investment accounts.

Move away slowly and sideways.

Moving sideways when confronted with a bear “allows you to keep an eye on the bear and avoid tripping,” the park service says. Taking side steps can also help you survive future bear markets. If stock market volatility has you quaking with nerves, consider rebalancing your portfolio to include more fixed income or alternative investments. These can buffer a portfolio when stocks decline. Alternatives in particular are intended to zig when markets zag, meaning they shouldn’t react to the same market triggers that cause stocks and bonds to lurch up or down.

Find a park ranger.

Just as hikers might turn to a park ranger for tips on how to navigate unfamiliar terrain safely, investors can turn to a financial advisor for help navigating volatile stock markets. “Having the counsel of a professional who is familiar with markets and comprehensive financial planning can help you navigate the landscape,” Crowell says.

How to stay safe around a stock market bear.

Here are eight tips to stay safe during a bear market:

— Identify yourself.

— Stay calm and stand your ground.

— Don’t run.

— Store your food out of reach.

— Do not drop your pack.

— Pick up small children.

— Move away slowly and sideways.

— Find a park ranger.

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