‘Blog’

Yesterday’s rally might have given you a bit of false confidence. Keep in mind that large rallys are nothing new to historical bear markets.

http://www.usnews.com/blogs/the-ticker/2008/10/29/what-matters-to-stocks-hint-its-not-the-fed.html

AllAfrica.com brings us this article with a perspective on investing niche can help amateur investors not only survive, but capitalize on a bear market like the one the NSE (Nigerian Stock Exchange) is currently undergoing.

A market analyst and investment adviser, Oladipo Adewumi, said the best approach to the market in the bear period is to put money in those equities that have been beaten by the bears but which still parade strong fundamentals.

Such stocks, according to him, cut across the different sectors of the market.

“One of the ways to identify them in any industry or sector is to compare the equities current prices to the trailing, quarterly or forward earnings per share. The higher the earnings per share and the lower the share price of a particular equity, the better the stock is for the investor, all things being equal” he added.

It isn’t surprising to learn that these similar strategies are just good fundamentals that are applicable regardless of geography since worldwide, we are experiencing down markets.

Sandra Hamilton writes

Until the government gets out of the way and lets the free market be free, then investing in the stock market becomes simply a quest of trying to decide what the government will do next. Unfortunately, the government is a lot more irrational than the general populace and its politicians have agendas we can never know about. I can make a prediction about human action; I have no idea what the government will do next.

What do you think? Are you holding your money out of stocks until the volatility of the government’s involvement is settled?

Here’s a classic mistake being made by average non-pro investors in this market: Actively trading. Survival in this market is going to mean diversifying across several asset classes with broad market index funds and sitting tight. If you are investing for the long-term 10, 20, or 30+ years this is THE strategy to use. If you need your money within 6 years, say for retirement, you really should pull out of the stock market.

And just in case you think that picking companies with “good governance” will be a surviving strategy, start here, you may be surprised.

What is the one thing that legendary the investors get, but ordinary investors don’t? That bear markets are a good thing.

Back in May at Berkshire Hathaway’s annual meeting, legendary investor Warren Buffett opined “I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month.” Buffett believes in the companies he invests in, and would welcome the opportunity to buy them at a discount.

Everyone knows the saying “buy low and sell high”, but you are never going to complete this equation if you are afraid to buy when the market is low. Maybe these numbers will alleviate some of your fears: Historically bear markets return gains of 5.6% annually. In the long term, that still beats or is close to beating the traditionally more conservative investments like bonds. But here are the real numbers you can’t afford to overlook: Following the last long bear market of 1969 to 1982 was an 18 year bull market that returned 18.5% annually.

Will you be an ordinary investor who gets scared into pulling out of stocks now, thus buying high and selling low, or will you follow the foot steps of the legendary investors and look long term with a mantra of “price versus value?”

What a wild and crazy ride today. The Dow down near 700 points at one point today and then rallying back to close down only double digits creating the largest intra-day range in history. For us long term investors, a volatile day like this doesn’t matter much in the long run, unless of course you are buying up stocks while while the market is down these last weeks.

Forbes.com has a nice “In Pictures” slide show feature detailing five bear market hedges and their results. It is an interesting look at some investment categories that can help you survive the next bear market.