Bear Market Coping Tactics

You might feel glum heading into this Christmas.

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The Federal Reserve is still a hawk flock. The world is bad, about to get worse, no end in sight. The tone of last Sunday’s year in review persists. If it’s grinding your gears, this note’s for you.

I spoke with longtime subscriber and friend Chad Fischer last night, about the emotions of the market.

He explained that it’s been hard watching fear and greed fluctuate throughout the year, every Fed press conference disturbing the peace, followed by a glimmer of cooler inflation data, hope for a reprieve, then hopes dashed by the Fed’s PR department.

Some coping tactics can help. Here are some of my favorites:

Don’t give stocks too much of your attention.

Your stock-market money is not your entire financial picture. You probably own many assets that the Fed doesn’t touch directly, nor do market algos, volatility, none of it.

Your home, your car, your bank accounts, your credit cards, indeed most of what you call your life is unaffected by stock market movement. Keep an eye on that non-stock side of your ledger in this bear market.

You sustain it, now let it sustain you.

Buy low prices.

You might be surprised by the psychological benefit that even a small purchase of low prices bestows upon your ruminating brain.

I have monitored investors and their accounts over the years. One of my favorite discoveries is that little triumphs go a long way.

For example, an investor friend owned many thousands of shares of a fund that declined from $61 to $18. When it was $18, he bought 50 additional shares. They represented something like 2% of his position, but you know what he talked about when the fund recovered to $30, then $40, then $50, then $60? That buy, way back at $18.

“I jumped on this thing at the very bottom,” he crowed, and the sentiment powered him through bad times. Small though it was, that symbolic move helped him cope.

It’s for this reason that our leveraged plans include a buying throttle. In a long enough bear market, our quarterly purchases will become tiny, but they’ll happen. That mere happening of something good sustains our souls.

Even small purchases pack a powerful emotional punch.

Focus on share count, not balance.

Here’s a clever tactic passed along to me by other longtime subscribers, Preston and Cambry Dane.

One way they keep themselves greedy when others are fearful is by replacing financial targets with share count targets. “How fast can we get to 5,000 shares?” they wrote. “How about 10,000? Low prices bring new highs!”

That’s right. Lower prices should bring higher share counts.

If you own 9,000 shares of a fund, make it a goal to nab another 1,000 for an even 10,000. In this set-up, a lower price that enables you to attain the milestone number comes as a blessing, not a curse.

Seeing your share count mount, and letting your mind project the big impact it will have on your balance when the fund appreciates $1 per share, then $5, then $15, will provide ever-present hope. Such hope goes a long way, in the market and in life.

Draw on the wisdom of elders.

They’ve seen it all, and know that this too shall pass. Anybody who has been in the market for decades learns to live with it. Their techniques will help you.

Here’s something that helped me: I plotted major life events on an axis of emotional impact, then overlaid the plot on a price chart of the S&P 500. Watching this showed me that my high, happy life moments did not necessarily coincide with a strong stock market, nor did my difficult life moments necessarily coincide with a weak stock market. There wasn’t much correlation.

My dominant memories were about life, not stocks.

The market goes up and down, and along its generally rising line life happens. It’s life we remember—oh, and something or other went down in the stock market. Those stock moments blend together in an amalgamation of the basic factors again and again. Fed, interest rates, earnings, jobs! Fed, interest rates, earnings, jobs!

In the future, and probably not as far as you think, news from this month and last will have liquefied into the long-term amalgamation you won’t care much about.

Your balance will be where it’s at and you’ll be fine. In time, the stock market will not dominate your memories.


More By This Author:

Real Earnings Yield
Economic Issues Of 2023
How High Will Interest Rates Go?

You can learn more about the way I use leveraged ETFs in The Kelly Letter at jasonkelly.com

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