7 Lessons for Bear Market Success

by Karen Riccio
By Karen Riccio

When my boss, Editorial Director Dawn Pennington, handed me the keys to the Weiss ratings vault, I felt like a kid in a candy store.

As the newest senior investment writer at Weiss, I’m fortunate to have access to a library of wisdom that stretches back over 20 years.

You name it, Dr. Martin Weiss and his company have navigated through it: financial crises, recessions, inflation, high interest rates, low interest rates, bubbles, bursts, bears, bulls, bond busts, bailouts, bank failures, debt ceilings and a pandemic.

All the nuggets of knowledge they gave to investors to guide them through the best and worst times: They’re all floating in a big cloud — and at my fingertips.

I’ve been around the financial industry block a few times, but this gave me the perfect opportunity to become intimately familiar with what makes the Weiss ratings unique — the investment strategies and ratings expertise that put the company on the map many, many moons ago.

Now, you’d think decades-old advice belongs in an archive, never to see the light of day again. However, not much of it needs dusting.

Many of the powerful lessons, strategies and wisdom that proved successful for followers of Weiss then, still pass the test of time today.

So, I thought I’d revisit some quintessential Martin Weiss from 2010 for your reading pleasure: “The Laws of Bear Market Success.”

Hopefully it will inspire and motivate you as much as it did when folks were still reeling from the Financial Crisis of 2008. The story feels eerily familiar.

The Laws of Bear 
 Market Success

“For the past three years, my team and I have repeatedly warned of a real estate collapse, a debt disaster, an economic catastrophe and a great bear market.

“Now, the time to merely warn of future crises is behind us. They have arrived. They are headline news not just in America, but all over the world.

“So now, it’s time for us to play a new role — to inspire you to fight back, seize control of your own destiny and triumph.”

We want you to be able to harness the many profit opportunities that every bear market offers with confidence, so you can emerge from this crisis with greater wealth than you have today. For example:

Weiss Analyst Chris Graebe just identified an opportunity in the equity crowdfunding space, which allows regular, nonaccredited investors to invest in early stage, pre-IPO companies. This presents a huge opportunity for Weiss Members. On March 28, Chris is unveiling that opportunity. Click here to learn more about how to claim an early stake.

 

Establishing that confidence and being able to identify profit opportunities begins with the following Laws for Bear Market Success.

Law No. 1:
Protect Your Capital

It’s easy to look back at the mistakes that big managers like Fisher Investments and big brokers like Merrill Lynch made and say, “Look! They bought the wrong investments. They screwed up.” True. That was a big mistake. But the bigger mistake they made was not their investment choices or timing. It was in their failure to protect your capital.

Act promptly to get rid of losers. Keep a ready store of cash. Remember: Just by keeping what you have, you’ll be far ahead of virtually everyone else.

Law No. 2:
Use Common Sense

Follow your instincts!

If you can see with your own eyes that a company is going down the tubes, get out. Don’t let a broker or a financial planner talk you out of selling investments that are obviously burning a hole in your portfolio.

Law No. 3:
Don’t Count on Big Gov

You shouldn’t rely on the government to turn the economy around or save sinking investments.

The government has already loaned, spent or guaranteed trillions of dollars, and the economy is still sinking. Trillions more are not going to change that trend. Yes, the government can stimulate temporary rallies in the stock market. But when and if it does, use them as opportunities to unload the bad investments you’ve been stuck with.

Law No. 4:
Only Invest in Highly Liquid, 
 Heavily Traded Investments

Invest exclusively in liquid, heavily traded investments.

In other words, stay away from investments that are easy to buy but hard to sell. Beware of mutual funds, annuities, insurance policies or even bank CDs that lock you in with sales fees or penalties. Stay away from thinly traded small-cap stocks, municipal bonds or exoteric plans that can entrap you.

It doesn’t matter how good the investment may appear. If you can’t jump out at a moment’s notice, it’s no good for these uncertain times.

Law No. 5:
Use Investments That Move 
 Independently of Stocks & Bonds

For example, currencies, which you can buy through simple instruments such as related ETFs. Other examples include gold and commodities, which you can also buy through ETFs. So, today, if you want to capitalize on the tailwinds from electric vehicle adoption pushing demand for copper, you could consider an ETF like the Global XCopper Miners ETF (COPX).

Law No. 6:
Find a Good Balance

Balance your portfolio.

You saw how it was obviously a mistake to place all bets on a bull market without any counterbalancing investments or hedges. Similarly, it could be a mistake to place all your bets on a bear market ...

In addition to inverse investments at the right time, make sure you have some counterbalancing positions.

Law No. 7:&
Stay Flexible

One of the big mistakes investors make is to limit their choices to stocks and be stuck in that mold. So, when all stocks fall, there’s no way they can avoid losing money.

Instead, expand your horizons beyond traditional investing approaches. As long as it’s based on common sense and you can buy and sell it easily in an ordinary brokerage account, don’t scratch it off your list just because it’s new to you.

That’s good stuff, right? As appropriate today as it was then. But what’s great about being an investor today is the number of alternative wealth-building tools. Yes, that includes crypto.

With so much uncertainty surrounding traditional publicly traded assets — be it stocks or bonds — it’s more important than ever to think outside the box.

We’re looking to private equity and the growing number of investment opportunities afforded by it to fill that void.

It could be a game changer for many years to come.

Until next time,

Karen

About the Senior Investment Writer

Karen Riccio has 20+ years’ experience as a journalist, writer and editor in the financial industry.

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