Today's market may not exactly feel like a bear market. Yes, all three benchmarks reached into bear territory last year. But since January, things have looked a lot brighter. The S&P 500 index, for example, has climbed more than 18%. And many of the growth stocks that plummeted in 2022 are now on the rise.
The S&P 500 has even advanced more than 20% from its bear-market low -- but it still must reach a new high before we can call a bull market. So, there's still time to take advantage of an opportunity bear markets offer. As tough as these markets may seem, they actually do make great times to buy stocks. Let's check out where to invest $10,000 right now in what might be the final stages of a bear market.
The opportunity of a bear market
So, what opportunity does a bear market actually offer? The chance to get in on stocks for a good price. In tough times, many solid companies suffer -- and investors flee their shares. This is the perfect moment for you to swoop in and grab a bargain.
But before you do that, it's important to consider your comfort with risk. If you're an aggressive investor, you may choose to focus your investments on beaten-down growth stocks that still offer solid long-term prospects. A good example is online pet supply retailer Chewy (CHWY 2.99%). The company reached profitability last year and is doing so well that it's even expanding into Canada. But the stock's performance hasn't followed.
The company's valuation is much lower than in the past, and at the same time, revenue has grown quite a bit.
CHWY PE Ratio (Forward) data by YCharts.
In spite of today's tough economy, Chewy's customers still are increasing their spend. Once the economy improves, Chewy's earnings -- and share price -- could take off.
Amazon (AMZN 3.43%) is another e-commerce giant to consider. The stock has soared 61% so far this year. But it's still trading lower than in the past in relation to sales. And Amazon's earnings could climb significantly over time thanks to work on its cost structure, and its leadership position in the high-growth industries of e-commerce and cloud computing.
AMZN PS Ratio data by YCharts.
Tips for cautious investors
So, what should you do if you're more of a cautious investor? In this case, I would favor steady players that can deliver in any economic situation. And this leads me to dividend stocks and healthcare companies. Many of these players also are trading for reasonable prices even if they didn't plummet during this bear market.
Dividend stocks pay you annual income just for owning the shares. So, even if the particular stock performs poorly in a given year, you still could win on your investment. I would favor Dividend Kings, stocks that have lifted their dividends for at least the past 50 years. This shows a commitment to dividend growth, meaning your returns are likely to climb year after year.
You'll recognize many stocks on that list as they're well-established companies that often are leaders in their fields, such as Coca-Cola and Target.
Healthcare players make great additions to your portfolio because they offer a certain earnings stability. Patients can't go without medicines and medical procedures even in tough economic times. So, healthcare companies generally don't see huge declines in demand. All of this means their shares usually hold up in most environments. They may not offer you the huge gain potential of a technology stock, but they offer you stability.
Dividing up the $10,000
If you're an aggressive investor, you might put a greater share of your $10,000 in growth stocks that have suffered and the rest in safer plays. If you're cautious, you should do the opposite. And if you're a middle-of-the-road sort of investor, you can split your investment 50-50 across the areas of risk and safety.
Now is the time to take advantage of what today's market has to offer -- good prices on top stocks. But these aren't stocks to hold during a bear market only. You'll want to buy stocks you're comfortable holding for the long term through both bear and bull markets.
Certain players may flourish in a strong market, while others will outperform in a weaker market. And that's OK. Over the long run, if you choose quality companies, all of these stocks together may help you along the path toward growing and maintaining wealth.
