10 Steps To Consider When Investing in a Bear Market

By Tracy Gallman , Senior Vice President Axos Invest, Axos Bank

Bull markets are the happy times.

For investors, periods of extended market increases can mean new investment opportunities, S&P 500 surges, and favorable returns for those making the right buying and selling decisions.

More often than not, bull markets are the Wall Street status quo. Over the nearly 100-year history of the S&P 500 Index, bull markets have ruled the day almost 90% of the past century.

But what about that other 10%? When securities prices tumble 20% or more for over two months, we’re officially in a bear market. While bull markets generally last over 6.5 years with average cumulative returns of almost 340%, bear markets usually last less than 18 months – but bring?average cumulative losses of nearly 40%?for stricken investors.

Bull markets have ruled the day almost 90% of the past century.

Once again, storm clouds have gathered. The bull market following the 2008 financial crisis is considered by many to be over. And the bear market that began in June 2022 seems poised to stay a while.

Despite that grim outlook, bear markets are no time for panic. Investors should simply be more careful about the choices they make while navigating these choppy waters.

Here are important steps concerned investors may want to consider for protecting assets, safeguarding the future, and possibly achieving return goals even while the bears are loose.

Focus on What You Can Control

1. Re-evaluate the amount of cash in your emergency account.

How many months of expenses do you have saved in cash? Keeping an interest-bearing account like Axos Bank’s Rewards Checking?can help maximize that money’s effectiveness, whether it’s for emergency use – or waiting for a golden investment opportunity.

2. Review your cash flow.

Will your income take a dip with a prolonged market downturn? Are there expenses you could cut? Making smart choices about seemingly minor expenses now could pay off if a downturn persists or worsens.

3.?Continue investing.

It seems counterintuitive, but now is a great time to put capital to work – and maybe even purchase securities with strong current value. Today, you can buy into a market priced at around a 20% discount from just six months ago.

Stick With Sound Investing Principles

1. Stay diversified.

Keep a mix of cash, equities, and fixed income in your portfolio. How much you allocate to each asset class will ultimately be a function of your personal time horizon, risk tolerance, tax bracket, and income needs.

2. Keep some exposure to equities.

Equities usually appreciate at a greater rate than inflation, addressing rising prices and longevity risk at once. Tools like TipRanks??(available with Axos Elite membership)?can make it easier to monitor market activity and research your next move.

3. Understand the distinction between risk tolerance and risk capacity.

They sound similar – but they’re very different concepts. Risk tolerance is how much risk you’re willing to take on. Meanwhile, risk capacity is the level of risk you’re able to take on. This provides an objective assessment of the level of risk you need to successfully reach your long-term financial goals.?

For Those in or Near Retirement

1. Consider your time frame for retirement.

Are you 10 to 15 years from needing distributions? Or is it closer to five to seven years? Those with shorter time frames may need to consider the risks of investing in down markets vs. their projected income needs.

2. Make sure your strategies are specific and customized to you.

Stop following the paths of others. Make sure your investment plan is tailored to focus directly on your individual wealth, life status, and holdings (longevity, health, tax status, career enjoyment, etc.).

3. Income can be key.

Have a retirement budget and know exactly how you’re funding it each month. Consider using financial tools designed for income and principal protection, such as CDs and dividend-paying vehicles for a portion of your wealth.

4. Consistency helps too.

Consider moving money into your investment account regularly. Automatic investing through an app aide like Axos Invest’s?Auto Deposit Scheduler?can sync regular investments to pay periods, specific days, or whenever you choose.

Keep Your Eyes Open

No amount of planning will ever completely insulate you from economic changes. However, paying attention to investing touchstones during high-stress periods can ensure the bears don’t trigger your own “fight or flight” response – and keep you better protected until the bulls return.

A Managed Portfolio could help support a long-term investing approach, even during bear markets. Visit Axos Invest Managed Portfolios. and choose the risk-based, low-cost ETF portfolio that’s right for you. Or talk with an Axos Invest Relationship Manager at 888-585-4965 for assistance.

Tracy Gallman ?has over 30 years of experience in the financial services industry. Tracy previously served as Senior Vice President with LPL Financial and PFS Investments before joining Axos in 2021 as a Senior Vice President overseeing Axos Invest strategy and product development.

Views expressed are as of December 1, 2022, and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the author, as applicable, and not necessarily those of?Axos Invest. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.