Financial markets are generally very dynamic. Sometimes we find certain assets in bullish condition. However, at one time the trend can turn to bearish.
Bullish and bearish themselves are terms used to describe market conditions that are rising (bullish) and currently falling (bearish). These two terms have become a kind of word that replaces the word rise and fall when talking about financial market conditions.
When investing, most investors definitely want bull market conditions. Because at times like these the value of their portfolio starts to increase. It also shows bright prospects for the future of assets, at least for some time to come.
On the other hand, some investors hate bear market conditions, where prices are in a downward trend which makes asset values continue to decrease. This condition tends to be disliked because the equity of their investment portfolio is lower than the initial investment value. And if that continued, there was a chance that they would actually lose some of their money.
In addition, a market that is currently bearish also does not give investors the opportunity to do anything. Usually they will tend to find it difficult to make a decision to buy an asset, because technically bearish assets do not show good prospects.
This is often a headache for investors. Because on the one hand their portfolio value is negative. Meanwhile, on the other hand, they cannot recover as soon as possible, because the market trend is bearish.
Then, what can be done when the market is bearish?
There are several things that can be done to deal with a bear market, including:
1. Diversify
When the market is bearish, it is better for investors to divide their portfolios into several different assets or what is often called verified. Diversification can be done based on the level of asset risk, type of asset or other criteria.
For example, by owning stocks and bonds in an investment portfolio or owning shares with mutual funds, or shares in companies in the mining sector with shares in companies in the technology sector and other combinations. The goal is to minimize unwanted losses due to a continued bearish market.
2. Seeing Market Prospects Based on Fundamentals
In addition, when the market is bearish, market analysis can be done by considering fundamental factors, for example, if the stock market means the company’s financial condition, business sector conditions, company business prospects, macroeconomic conditions, global economic conditions and so on.
Considering fundamental factors can provide a more sound judgment than looking at the technical side. And it is more important that fundamental factors are not affected by market conditions, but instead influence and can even change market conditions themselves.
3. Implementing a Dollar Cost Averaging (DCA) Strategy
Should investors stop buying assets during a bear market? Not really. Investors can apply a dollar cost averaging strategy or buy assets regularly for a certain period.
This strategy can be used because there is no need to consider market conditions at that time. However, that does not mean that analysis is not needed. Because you still need to choose which potential assets, then buy them.
Because even if DCA has low risk, DCA will not be able to turn assets that have bad potential into profitable assets.
4. Limiting Losses to a Certain Percentage
In the end, any analysis using any method, the results are uncertain. Even if investors use fundamental analysis, market conditions may differ from what they predict. Therefore, it is always important to limit investment losses within certain limits.
To limit losses, investors can do this by determining a loss limit based on the percentage of the initial investment capital. For example, if an asset is consistently bearish, they may decide to cut losses when the portfolio value reaches 50% of their initial capital or whatever they can handle.
So, those are 4 things to do when the market is bearish. If you are an investor, you can try to apply it during bearish market conditions. So that you are no longer confused or feel helpless in dealing with market situations like that.
However, it should be noted that these things do not guarantee that you will change the state of your portfolio, for example from loss to profit. However, doing so will guarantee that your investment risk will be lower and controllable. So that the losses that you might get in a bearish market can be suppressed.
When the financial market is sluggish, financial assets may not be able to provide satisfactory profits and may even experience a decrease in value. For example, when the economy is sluggish stock prices tend to fall. Likewise with bonds, when interest rates rise which often occurs when the economy is sluggish, bond prices actually fall, because interest rates and bond prices have a negative correlation. In general, the price of financial assets is strongly influenced by economic conditions. If economic conditions are good, the price of financial assets generally increases, which can mean that investors are making a profit. However, if the economy is in a recession, the price of financial assets will fall.
