Many (most?) investors are feeling pretty wretched about their investments these days. The slide that began in January of 2000 seems unable to find a solid bottom. The recession is over, the economy is growing, yet the market flounders like a horse in quicksand, and the brazen thievery of some prominent public corporations has called into question the earnings of all. When is the pain going to end? Put this market on Prozac!
In the meantime, investors wait for things to get back to normal.
But face it: There is no normal to get back to. "Normal" for the stock market is a long-term average return of between 10% and 11%. Guess how often in the past 40 years the Dow returned between 10% and 11%? Exactly once. Most years weren't even close.
In only four years out of the last 40 did the Dow chalk up a nice, moderate return of between 6% and 15%. That's one year in 10 that you might have gotten an "average return." Mostly, the market either overshoots or crashes. That's what's normal. This bear market is not abnormal. It's not exactly an every-decade occurrence, but then neither were the five years of double-digit growth at the end of the 1990s. Perhaps it's just time to pay the piper for that five-year rave.
So we wait. Or we rant. Or we tune out. Or we try to understand just exactly what the heck is going on. Ask us in 10 years.
Now that air-conditioning has eliminated the option of jumping out the window of a Wall Street skyscraper, what's an investor to do? We've collected a multitude of Foolish writings to offer some perspective.
Endure the Bear
Stock market investing provides high long-term returns precisely because of high short-term volatility. If there were no bear markets, the long-term return on stocks would be closer to that of bonds. So tough it out, soldier.
Embrace the Bear
The idea that bear markets are "stocks on sale" may help some cope. Of course, that's only if you have some cash left. A sale is not much fun when you're broke. And if you're thinking about retiring anytime soon, there's not much comfort in knowing that your investments are for sale in a buyer's market.
Challenge the Bear
When you finally achieve financial independence and are living off your investments, how do you protect yourself from the next extreme case of market volatility? Don't let the bear get his claws into the cash you need for living expenses. Have a plan.
Contemplate the Bear
This bear market is worse than many, that's for sure. But bad as it is, this is not the worst bear market we've seen since 1929, not by a long shot. Not yet, anyway.
Outsmart the Bear
Think you can time the market? The problem with selling in a bear market is that every bear market has its own ups and downs. When the true recovery finally arrives, it bears a striking resemblance to previous upturns that were followed by their own mini-crashes. By the time it's clear that the recovery has really started, the market is usually well past the point where you sold and you have to buy back in at a higher price. That's why most attempts to time the market end up losing out to a simple, long-term buy-and-hold plan.
Sleep With the Bear
If you can accept it, you might just make the bear market work to your advantage. If not, shore up your short-term savings and hibernate with the Bear.
For even more reading, see the related links box on the righthand corner of this article.
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