The financial media often portrays bear markets as something to be feared - a bogeyman for the retail investor's portfolio or an apocalyptic scenario that will decimate your retirement savings. But if we listen to the advice of the world's most successful hedge fund managers and value investors, we learn that bear markets can actually be a gift for those who are prepared. From picking up cheap shares of good companies to investing in new asset classes, bear markets offer numerous opportunities to bolster your portfolio.
Diversify with Alternative Investments
For a truly diversified portfolio, investors need to look beyond stocks and bonds in different sectors. Naguib Sawiris, a billionaire precious metals investor from Egypt, recommends investors put as much as 30% of their portfolio in gold. Mark Cuban disagrees. Despite cryptocurrencies' controversy, he believes Bitcoin is a better place for your money. What many wealthy investors do agree on is real estate. A report from UBS and PwC found that almost 50% of all billionaires hold a substantial stake in it. Collectibles are another option for diversification. Though traditionally an arena exclusive to high-net-worth individuals, even rare wines and fine art are now accessible to the average investor.
Look for Discounts
When the market outlook is grim, many investors sell to cut their losses. Warren Buffet, however, starts buying. Although Buffet hasn't revealed every detail of his investment strategy, the companies he invests in have several metrics in common, including consistent returns and a low debt-to-equity ratio. Additionally, he chooses companies that can change their prices to keep up with inflation which is also why he suggests avoiding cash. Generally, Buffet recommends keeping a long-term outlook, so if unrealized losses are making you doubt your investment strategy, remember W.W.B.D. - What Would Buffet Do?