Summer 2022 brings baseball, barbecues, and a bear market. Today, we’re discussing tips to invest through an economic downturn and how long dips typically last.
Also in this edition:
- How to use automation to your advantage
- Bitcoin’s relationship to the stock market
- The anatomy of a decision
Much like running into a wild bear, bear markets cause stress, worry, and uncertainty.
The good news is bear markets aren’t permanent. They typically come twice a decade and last, on average, less than two years. They also follow a predictable pattern:
- Phase 1: A period of high investor sentiment and prices. But by the end of this phase, investors start to hold onto profits and leave the market.
- Phase 2: Stock prices begin to fall, trading activity slows, and the economy raises a red flag. Investors may feel pressured to sell as sentiment declines.
- Phase 3: Risk tolerant investors, also called speculators, re-enter the market. This move can raise trading volume and some stock prices.
- Phase 4: Price dips slow and positive market news attracts investors back to the market. This phase can lead back to a bull market.
Bear markets affect everyone – even the world’s richest people have experienced massive losses this year. Mark Zuckerberg has lost more than $40 billion, Jeff Bezos has lost around $60 billion, and Elon Musk has lost around $79 billion.
Financial loss is a given in investing. But issues such as inflation, high interest rates, and market dips tend to have a greater impact on the daily lives of people who aren’t mass affluent.
As a long-term investor, you can take a few steps to try to minimize the impact of economic downturns.
- Stick to your long-term plan
- Create an investing schedule
- Better your financial wellness
- Automate your finances
As the bear market lumbers on, feeling in control of your finances can help you focus on your friends, family, work, and hobbies — the true necessities of life.
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Learn all about fractional shares
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This week, take a moment to focus on:
- A mindset: “Be fearful when others are greedy, and be greedy only when others are fearful.” – Warren Buffett
- A direction: Bitcoin has been trading with the stock market this year, Chartr explains.
- A framework: A good decision-making process can change the world — yours included.
On behalf of the M1 team,
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