In the USA, both the S&P 500 and the Nasdaq are in bear market territory. A bear market is often taken to mean a 20% fall. That’s either from a recent peak, or over a set period of time.But generally, investors tend to think of any sustained upwards run as a bull market. And any significant downwards spell is a bear market. Typically, the average bull market has lasted around five years. The average bear, meanwhile, continues for a little more than a year.
Might long-term investors be better of if that was the other way round, with more falls than rises? Wouldn’t we have more opportunities to buy cheap shares? To answer that, I can’t think of anything better than looking at how the billionaire boss of Berkshire Hathaway, Warren Buffett, deals with stock market falls.
In the few weeks after the Covid-19 pandemic struck, the S&P 500 fell 30%. The recovery was surprisingly fast, with the index regaining its ground by August. The FTSE 100 took quite a bit longer, mind. What happened the next year, in 2021? The S&P 500 gained 28.7%, while Buffett’s Berkshire Hathaway slightly bettered it with 29.6%. Buying shares while they were depressed by the pandemic was clearly a good plan.
Major bear market
But that’s nothing compared to the carnage resulting from the the financial crash, which kicked off in 2007. Between a high point in October that year, and the beginning of March 2009, the S&P 500 crashed by a whopping 56%.
Berkshire Hathaway suffered too, albeit with a softer fall of 32%. Now what do we see if we wind forward a decade? From the depths of the banking crash in 2009, the S&P 500 had gained 280% by the same point in 2019. Buffett’s shareholders did a bit better on 290%, and they’d started from a significantly lower initial fall.
Just like the Covid market slump, the financial crash provided investors with a great time to buy. And those who were panicking and selling while shares were down? Well, we can see what they missed.
Fear and greed
Buffett is famed for buying heavily when he sees great companies unfairly marked down. In his 1986 letter to Berkshire Hathaway shareholders, he explained how he avoids trying to time the market bottoms. Instead, he said: “Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.“
That approach to bear markets has served Buffett, and his shareholders, well.From Buffett taking control of Berkshire Hathaway in 1965 up to the end of 2021, the S&P 500 managed a total return (including dividends) of more than 30,000%. Berkshire, meanwhile, soared by a total of 3.6 million percent!
We’re not all going to be as good as Buffett. But even investors who make regular purchases in an index tracker will benefit from bear markets over the long term. The simple truth is that when markets are down, we can buy more shares for the same money.
The hotshot analysts at The Motley Fool UK’s flagship share-tipping service Share Advisor have just unveiled what they think could be the six best buys for investors right now. And while timing isn’t everything, the average return of their previous stock picks shows that it could pay to get in early on their best ideas – particularly in this current climate! What’s more, all six ‘Best Buys Now’ are available to access right now, in just a few clicks.
Critics by: principal.com
If you have reviewed these basics and you still have money at the end of the month, here’s a quick look at further investment options to consider.
1. Increase your deferral to your 401(k) or other workplace retirement plan.
The maximum amount you can contribute each year through elective salary deferrals is $19,500.1 And if you’re 50 or older, you can also make a “catch up” contribution of up to $6,500.2
“Bumping up your deferral, even by 1 or 2%, may not seem like much. But with the power of compounding earnings, it can make a big difference over 20 or 30 years,” says Heather Winston, CFP®, assistant director of financial advice and planning for Principal®. Also, weigh the difference between saving in a tax-deferred account vs. a taxable one.
Winston says if your account has taken a dip, increasing your contributions may help you reach your retirement goal sooner. If the markets have dropped, the money you defer to your retirement plan may go further by allowing you to buy more shares.
2. Add to your traditional or Roth Individual Retirement Account (IRA).
Good news: You have until July 15, 2020, to make a 2019 contribution to an IRA, thanks to recent legislation. (And you can always make a 2020 contribution now, too.)
Depending how much money you make and if you’re not covered by a retirement plan at work, you may be able to deduct all or a portion of your traditional IRA contributions from your taxes (details are on the IRS website). The more you save today, the more you’ll likely have years down the road.
With a Roth IRA, you can contribute up to $6,000 per year using after-tax money. If you’re 50 or older, you can add an extra $1,000 per year. To contribute the full amount to a Roth IRA, you need to make less than:
- $124,000 if you’re single or file as head of household.
- $196,000 if you’re married filing jointly.
You can withdraw your annual Roth IRA contributions without taxes or penalties at any time. If you have earnings, you can withdraw them tax-free in retirement.3
To get started: Review our IRA solutions to see what may be best for you.
Tip: Monitor and rebalance. If you’re investing in the market through a retirement plan, IRA, stocks, or mutual funds, consider putting this on your to-do list annually: Rebalance your portfolio (PDF) and make sure you have a diverse mix of investment options within various asset classes. A financial professional can help you learn how to do that.
3. Open a brokerage account, if you don’t already have one.
If you’ve never invested in stocks and mutual funds outside of your workplace retirement plan or IRAs, you could start by opening a brokerage account. (Not sure if you’re ready? Read “Four signs you’re ready to start investing.”)
You’ll need to know your risk tolerance. A risk profile (PDF) places you on a scale somewhere between conservative (more averse to risk) and aggressive (more tolerant of risk). Your profile can help you select investments and build a portfolio at a level of risk you’re comfortable with, while continuing to work toward your goals.
This year is a good test of investors’ tolerance for risk. If you find yourself worrying about whether your portfolio is gaining or losing day-to-day, or certainly if you’re losing sleep, you may need to adjust your risk profile. When your risk tolerance matches your investment portfolio, volatile times can be less concerning for you.
To get started: Connect with a financial professional to discuss your options.
Asset classes you might consider
If you invest, consider diversifying—spreading your money across multiple types of investments—to help reduce the risk of losing money.
- Large companies and technology stocks will likely continue to perform well.
- Look at small companies and sectors like energy, materials, consumer discretionary (non-essential goods and services), and financials to improve.
- Stocks in emerging countries may perform better than those in developed countries outside the United States.
- For bonds, go for higher yields on high quality corporate and municipal bonds at short-intermediate maturities.
4. Set aside money in a 529 savings plan for a child or grandchild.
A 529 savings plan allows you to invest your money to be used for qualified education expenses such as college, apprenticeship programs, and K-12. This includes tuition, room and board, mandatory fees, and textbooks. You designate how and where it’s spent.
Before opening an account, get a full understanding of the plan, including its tax benefits, fees, expenses, and investment options. You can open a 529 plan offered by any state, so shop around for the one that best suits your needs.
To get started: If you’re interested in learning about our 529 plan, visit scholarsedge529.com.
5. Contribute more to a Health Savings Account (HSA).
If you’re enrolled in a High Deductible Health Plan (HDHP), you can add a total of $3,550 a year for single coverage or a max of $7,100 for family coverage in 2020. If you’re over age 55 but under 65, you can also make “catch-up” contributions to your HSA, to the tune of $1,000 more per year.
An HSA offers a triple advantage on federal income taxes: Money put in isn’t taxed, it grows tax-free, and you’re not taxed when you take money out for medical expenses. Plus you decide how the funds are invested, and how you’ll use the money for health care expenses.
To get started: Talk to your employer’s human resources department about how to contribute more to an HSA associated with your HDHP.
- Is the Stock Market Going to Crash?
- When Will The Stock Market Recover?
- Stock Market Volatility: What It Is and How It May Affect Your Investments
- Compare Share Dealing Accounts
- Compare Stocks and Shares ISAs
- Compare Robo-Investing Platforms
- Share Dealing Accounts for Beginners
- Compare Cheap Share Dealing Accounts
- Growth Stocks
- Dividend Stocks
- Value Stocks
- Get Started with Investing
- Apple Loop: Stunning iPhone 14 Pro Leaks, Controversial iPad Decision, Apple Facing Repair Problems
- 6 share winners of the stock market crash
More Remote Working Apps:
https://quintexcapital.com/?ref=arminham Quintex Capital
https://www.genesis-mining.com/a/2535466 Genesis Mining
https://jvz8.com/c/202927/369164 prime stocks
https://jvz3.com/c/202927/361015 content gorilla
https://jvz8.com/c/202927/366443 stock rush
https://jvz4.com/c/202927/296191 gluten free
https://jvz1.com/c/202927/286851 diet fitness diabetes
https://jvz8.com/c/202927/213027 writing job
https://jvz4.com/c/202927/358049 profile mate
https://jvz8.com/c/202927/376524 super backdrop
https://jvz2.com/c/202927/184902 gaming jobs
https://jvz4.com/c/202927/343405 PR Rage
https://jvz6.com/c/202927/371547 design beast
https://jvz3.com/c/202927/376879 commission smasher
https://jvz2.com/c/202927/376925 MT4Code System
https://jvz6.com/c/202927/375959 viral dash
https://jvz1.com/c/202927/376877 forex expert
https://jvz8.com/c/202927/376381 ada leadz
https://jvz2.com/c/202927/337292 DFY Suite 3.0 Agency+ information
https://jvz8.com/c/202927/291061 VideoRobot Enterprise
https://jvz8.com/c/202927/327447 Klippyo Kreators
https://jvz8.com/c/202927/324615 ChatterPal Commercial
https://jvz8.com/c/202927/299907 WP GDPR Fix Elite Unltd Sites
https://jvz3.com/c/202927/342585 VidSnatcher Commercial
https://jvz3.com/c/202927/320972 Storymate Luxury Edition
https://jvz2.com/c/202927/320466 iTraffic X – Platinum Edition
https://jvz2.com/c/202927/330783 Content Gorilla One-time
https://jvz2.com/c/202927/301402 Push Button Traffic 3.0 – Brand New
https://jvz2.com/c/202927/297271 Designa Suite License
https://jvz2.com/c/202927/310335 XFUNNELS FE Commercial
https://jvz2.com/c/202927/343635 MediaCloudPro 2.0 – Agency
https://jvz2.com/c/202927/353558 MyTrafficJacker 2.0 Pro+
https://jvz2.com/c/202927/365061 AIWA Commercial
https://jvz2.com/c/202927/357201 Toon Video Maker Premium
https://jvz2.com/c/202927/351754 Steven Alvey’s Signature Series
https://jvz2.com/c/202927/344541 Fade To Black
https://jvz2.com/c/202927/290487 Adsense Machine
https://jvz2.com/c/202927/315596 Diddly Pay’s DLCM DFY Club
https://jvz2.com/c/202927/355249 CourseReel Professional
https://jvz2.com/c/202927/309649 SociJam System
https://jvz2.com/c/202927/263380 360Apps Certification
https://jvz2.com/c/202927/377557 Instant Website Bundle
https://jvz2.com/c/202927/377194 GMB Magic Content
https://jvz2.com/c/202927/376962 PlayerNeos VR
https://jvz8.com/c/202927/381812/ BrandElevate Bundle information
https://jvz4.com/c/202927/381807/ BrandElevate Ultimate
https://jvz2.com/c/202927/381556/ WowBackgraounds Plus
https://jvz4.com/c/202927/381689/ Your3DPal Ultimate
https://jvz2.com/c/202927/380877/ BigAudio Club Fast Pass
https://jvz3.com/c/202927/379998/ Podcast Masterclass
https://jvz3.com/c/202927/366537/ VideoGameSuite Exclusive
https://jvzoo.com/c/202927/381179 YTSuite Advanced
https://jvz1.com/c/202927/381749/ Xinemax 2.0 Commercial
https://jvzoo.com/c/202927/382455 Living An Intentional Life
https://jvzoo.com/c/202927/381812 BrandElevate Bundle
https://jvzoo.com/c/202927/381935 Ezy MultiStores
https://jvz2.com/c/202927/381194/ DFY Suite 4.0 Agency
https://jvz4.com/c/202927/381976/ AppOwls Bundle
https://jvz3.com/c/202927/381615/ WOW Backgrounds 2.0
https://jvz4.com/c/202927/381560 ALL-in-One HD Stock Bundle
https://jvz6.com/c/202927/382326/ Viddeyo Bundle
https://jvz8.com/c/202927/381617/ The Forex Joustar