The Most Important Rule To Survive A Bear Market
If you want to survive this bear market, you have to do one simple thing.
Never average down.
It’s simple when we’re just discussing it here.
But it’s oh so tempting.
You want to get your money back and doubling down will make that much easier.
Theoretically, maybe.
But it usually just makes it twice as hard in a bear market.
That’s why, if you do just one thing during the current market, make sure it is never average down.
Never.
Ever.
By not averaging down you will avoid two of the biggest risks that turn painful bear markets into absolute catastrophes.
Those risks are:
1: Averaging down into a hole.
A stock dips, you buy more.
It dips again, you buy more again.
It dips again, you buy more again.
Pretty soon you’ve ridden a stock down a big slope.
This is a risk in any market. It’s far bigger during a bear market.
If you don’t average down, you avoid this massive risk.
2. High concentration in a stock in a bad trend
If you’re averaging down into a stock, you’re guaranteeing that you buy a stock the market doesn’t like.
It’s not always a bad idea to buy stocks the market doesn’t like or understand.
That’s how you make exceptional returns.
However, in bear markets, the market can and will sell something down far more than most people ever dream possible.
The sidelines is the best place to wait things out.
Averaging down is a strategy that involves buying more shares of a stock at a lower price in an effort to lower the overall cost basis of the investment.
Bear markets aren’t the time to bravely fight the market.
Run away, sell early, and fight another day.
Do not average down.
