In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool analysts Jason Moser and Brendan Mathews take a question from a reader who writes:
Are we entering a bear market? It seems like we are steady going down in share price this year. Thoughts?
While it has been a volatile beginning to 2014 after a tremendous year for the markets in 2013, Jason notes that a bear market is typically defined as a 20% drop in the market, and the S&P 500 is actually up a little more than 2% year to date. So while we probably aren't on the cusp of entering a bear market, investors would be wise to lay out a strategy for dealing with a bear market when the time comes.
Brendan and Jason both believe that it's not useful to try to time the market. Rather, investors should invest in companies that they feel comfortable holding through thick and thin, while also maintaining a cash balance in order to take advantage of those times when their favorite stocks go on sale.
Three stocks to own for the rest of your life
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love.