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Kavan Choksi Talks About Important Bear Market Investment Strategies to Make Gains


Jun 30, 2023
Kavan Choksi Talks About Important Bear Market Investment Strategies to Make Gains

No one wants to witness their investments take a tip, let alone a plummet. Hence, many investors tend to dread the bear market. As pointed by Kavan Choksi, in such situations, securities usually fall at least 20% in value, and a high level of pessimism surrounds the market. However, for savvy, experienced investors, bear markets are nothing to be afraid of. Rather, they tend to leverage certain smart strategies to make a profit in such markets.

Kavan Choksi underlines a few investment strategies to follow to survive a bear market

Bull markets may run for a long time, but the market doesn’t stay the same forever. Hence, investors need to be prepared for what may happen when the bull market comes to an end. If the market decline continues for more than two months, it is considered to be an entry into a bear market. A bear market is ideally marked by a period of negative returns. During such situations, market sentiments are pessimistic, thereby leading to greater stock sell-offs that weigh down the market.

Even though a large group of investors fear bear markets, it often can prove to be a great opportunity to grow the portfolio and prepare the groundwork for long-term wealth creation. Here are a few bear market investment strategies that can help investors come out ahead in the end.

  • Wait it out: As the stocks start to plummet during a bear market, one would be tempted to try and cut their losses by selling their share. However, in many cases, it would be a smarter choice to buy and hold, even during economic downturns. Much like the bull market, the bear market also doesn’t last forever. Historically, the market’s upward movement has tended to prevail over the declines long term. Hence, by waiting it out, long-term investors can make good profits on their stocks.
  • Hedge bets with dollar cost averaging: As the stock market has historically bounced back, the bear market presents good opportunities for long-term investors to purchase the dip. They shouldn’t try to time the market to hedge their bets and rather consider using dollar cost averaging. Such an approach seeks to lower the amount one has to pay for stocks that have potentially low risks. To make use of this strategy, investors can put equal amounts of money into their favorite stocks at regular intervals. By making investments repeatedly at different times and prices, they can effectively average out the buy-in price and avoid buying too high in order to take advantage of a dropping market.
  • Invest in ETFs of defensive industries: Diversifying the portfolio is among the most important strategies for both the bear and bull markets in order to hedge the losses on the whole. Investing in index funds or exchange-traded funds of defensive industries would especially be a good investment strategy for the bar market. These funds hold shares in multiple companies and, therefore, can diversify the investment portfolio. Defensive industries imply to the sectors that consumers tend to use even in hard times, and hence their funds can add a stabilizing branch to the portfolio.

As mentioned by Kavan Choksi, falling market prices can provide opportunities to make gains in the short term. Even though they may not be as safe as long-term investment strategies, they are a good choice for investors willing to take the risk.

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