Written by Summary
A bear market may arrive. According to many, it’s coming soon to a stock market near you.
The Fed’s rate action, war in Europe, and all-but-forgotten COVID pandemic are weighing down the minds of many.
I will survive and thrive in a bear market, here’s how.
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I get asked a lot of questions. It makes sense that I do. I write a lot. Yet, no matter how many times I write on a topic, it’s new and fresh to someone. You see, Seeking Alpha is an amazing place to write for and read. You get exposed to an extensive array of authors and viewpoints, and you get to join in the discussion alongside hundreds of thousands of individuals around the world.
I often get asked how I would survive a bear market. To be clear, we’re not there yet. Data by YCharts The Nasdaq was closing in on Bear Market territory, but the S&P 500 and Dow Jones index are still far away from one.
Some see a bear market in every bush, even in the best bull market. It reminds me of a quote from a Frank Peretti novel where a group of pastors is gathered to discuss recent activity occurring in their local town. One pastor was attempting to attribute everything to the spiritual realm, and another pastor exclaimed:
To which the pastor replied: You wouldn’t see a demon if it was smacking you in the face! When it comes to the market, many have made a name for themselves as being “perma-bulls” or “perma-bears.” No matter what’s going on, they have a pre-determined outlook, and often so do their devout followers.
I try to tread a different path. I like to tread a little more softly.
With Ukraine under siege, waiting for the latest version of COVID to lock down the world, and inflation taking off, many are expecting with worried souls that the market is due to collapse next.
So how would I survive a bear market? I first decided to ask High Dividend Opportunities members in our chat room how they’d survive a Bear Market: HDO Chat We gave the options of gold, guns, or Cinnabons. Unsurprisingly, food won out over the other options with the unsolicited addition of alcohol and chocolate. This makes sense – 33% of adults self-report eating as a means of distracting themselves from stress, according to the American Psychological Association.
Now it’s important to remember our test sample here: They’re all High Dividend Opportunities members. They know something that you may not. They know the benefits of income investing and the powerful benefits behind it.
Let’s talk about why Cinnabon won out in our poll as we expected. For the sake of time and space, we will only look at the top two responses – gold and Cinnabons. Gold: Not As Tasty, Still Very Shiny
Gold is often proclaimed as a strong inflationary hedge and a “safe” place to invest during a Bear market. Yet has it truly been a winner? Data by YCharts The value of gold is a lot less stable than many like to admit. As we can see over the last decade, gold’s value has dipped until 2020 and rarely outperformed in bear markets except to say it stayed flatter than the market’s price. During bull markets, gold’s value often dipped.
The price of gold has also not largely kept up with inflation until it recently spiked and recovered to prices not seen in a decade.
Gold also comes with some serious drawbacks:
> You have to store it, often paying fees for storage in a secure location. You have to find a means to re-sell it hoping to get market value. Gold does not generate income on its own and does not keep up with the market’s total return. While gold is shiny and tangible, it fails to provide strong benefits many think it does in a bear market. Furthermore, gold itself has failed to keep lock-step with inflation: Reuters When adjusting the nominal price of gold with inflation, we can see it has largely failed to keep up with the mass printing of US dollars. Gold has never recovered to its heights in the 1980s, and it’s doubtful it will as inflation continues to run away.While I think scarcity and tangible materials are important to outlast, outwit, […]
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