INVESTING IN A BEAR MARKET

A bear market is when the overall financial market is taking a downturn and when there is an extended period of general price declines.

When the economy is poor, it's natural for investors to be curious about how to make money by investing in a bear market. While stocks can be more volatile in a sinking market, investors may be able to profit from a falling market if they pick the right investments.

In a bear market, few sectors tend to outperform the rest. Healthcare, food, consumer staples, and basic transportation are examples of relatively inelastic industries that can perform well in a bear market. When the Covid-19 pandemic hit, in early 2020, stocks like CIPLA, ALEMBIC PHARMA rose by an average of 35%. Having such recession-resistant stocks in your portfolio helps in protecting yourself.

“Buy low sell high” is a common phrase heard by most of us. So what kind of stocks do you invest when an opportunity presents itself -

• Healthy companies: Stocks like Amazon, Reliance, Tesla, Nestle have been doing great during this pandemic because they have a strong balance sheet to support them even during the tough times. So investing in healthy and trustworthy companies like these can help investors survive through a bear market.

• Companies with caliber to come back up : Many companies that are strong and have good potential in the future also take a hit during a bear market. Investing in these is a smart idea because you know they have the potential and financial resources to come back up. During the 2008 financial crisis, Goldman Sachs’ share price went down from $233 to $66 per share because of the reputation hit they took, but now they stand at $200 a share.

• Cyclical stocks: A cyclical stock typically moves up or down depending on the upward or downward movement in the economy. Investing in cyclical stocks is also a good idea as we know they will go back up when the market starts to advance. Stocks like Eicher Motors, ICICI, Honeywell are few examples of cyclical stocks.

It is important for investors to not panic during a bear market and sell low. Bear markets tend to punish investors who gamble and make most of us to rethink our portfolio. One must remember that if you're investing for the long term, what's most important is to have patience and trust the market's resilience and the diversification you've built into your portfolio. Because, in many

cases, the best thing to do, is doing nothing at all.