This year hasn't been easy for investors, and with concerns that a recession could be looming, many people are worried about what that means for their money.
While nobody can say how the market will perform over the coming months, it's certain that a bull market is on the way. Every single bear market in history has eventually given way to a bull market, and this one will be no different.
That may not be overly reassuring while stocks are still in a slump, but now is the time to start preparing for the inevitable upswing. Here's how the smartest investors are getting ready.
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1. Avoid trying to time the market
In an ideal world, the best way to make money in the market would be to invest only when prices are at rock bottom, then sell when they peak.
In the real world, though, the stock market can be unpredictable. Nobody -- even the experts -- knows exactly when stock prices will bottom out.
In that case, you're better off investing consistently rather than trying to time the market. You may buy now only to have stock prices drop in the future, but that's better than waiting too long and investing after prices surge.
Legendary investor Peter Lynch put it this way in a 2003 interview with Money Magazine: "[M]y system for over 30 years has been this: When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30."
2. Keep a long-term outlook
No one knows exactly how long it will take for the market to recover. Some bear markets bottom out after only a few months, while others last for over a year. But it will recover eventually.
The best thing you can do in the meantime is stay patient. If stocks fall again, try not to panic, and instead focus on the long term. The market itself has faced dozens of corrections, bear markets, and recessions over the years, yet it's recovered from all of them.
Given enough time, it will recover from this downturn, too. By staying in the market for the long haul, you'll reap the rewards during the inevitable rebound.
In the words of John Bogle, founder of Vanguard and one of the most successful investors of all time, "Time is your friend. Impulse is your enemy."
3. Don't wait too long to invest
When stock prices are tumbling, it's tempting to put off investing until the market looks a little more promising. But again, timing the market effectively is nearly impossible. If you wait too long to buy, you could miss out on significant earnings.
In 2008, Warren Buffett wrote an opinion article for The New York Times. "I can't predict the short-term movements of the stock market," he wrote. "What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over."
It can be an intimidating time to invest, but right now is one of the best buying opportunities of the year. By investing now, ignoring the impulse to time the market, and staying in the market for the long term, you can take full advantage of the upcoming bull market.
