Wall Street veteran Shelby Davis put it best: "You make your best money in bear markets. You just don't realize at the time." When Wall Street's mood sours, nearly every security goes along for the ride. Prudent investors eagerly wait for such moments, ready to invest at very attractive prices.

You must be patient
Investing through bear markets is not fun. Unless you enjoy a rare moment of luck, you'll probably experience some volatility, watching your investments go down before they go up. You may initially think you would have been best to wait -- but that's utter nonsense.

As long as you pay the right price, what happens in the short term is immaterial. In fact, a fall in the markets means that your overall portfolio has now become an even better bargain than before. If you've invested in undervalued securities, you should welcome declining prices; they give you the chance to buy more of a good thing, at a lower cost. Good, strong, well-run stocks will always rebound from their lows. You just need to be patient.

Market declines are a good thing
Investors are an ironic bunch. When markets are rising and fund performance numbers are climbing, they rush to invest additional capital, without really forming a coherent investment approach. Yet when markets decline and securities are selling at even wider discounts to intrinsic value, that money tap runs dry.

Investors who stick to their guns and buy only undervalued issues will ultimately make the most of bear-market opportunities. The profits may require some time to bear fruit, but there's ample evidence supporting the benefits of buying during periods of uncertainty and economic decline.

During the recession of the early 2000s, many industries experienced declines, particularly in the formerly frothy tech sector. For the most part, the suffering companies deserved those drops. Businesses without revenue, much yet less earnings, were given billion-dollar market valuations. Investors participating in these "exciting" issues were playing with fire.

On the other hand, sound businesses like Apple (Nasdaq: AAPL), which did trade at high valuations at the height of the bubble, found themselves trading for reasonable valuations amid the market correction. From 2001 -2003, shares in Apple barely rose, but sales were climbing, and Steve Jobs was back at the helm. Investors who waited out the doldrums were enriched many times over when Apple began to hit its stride in 2004.

Today's housing market greatly resembles yesterday's Internet bubble. Homebuilders and financials are getting clobbered left and right, and then as now, some businesses will crumble. But I believe that others -- such as homebuilder NVR (NYSE: NVR) or Merrill Lynch (NYSE: MER) -- will ultimately reward patient investors. NVR has always had excellent management, and John Thain is imminently qualified to get Merrill out of its current mess.

History repeats itself
The current market environment is choppy at best, and things may worsen before they improve. Portfolios may suffer temporarily. But I'm certain that several years from now, we'll be writing about the attractive investment opportunities that 2007 and 2008 offered.

Investors like Bill Miller have produced excellent results by being contrarians. Miller bought Amazon.com (Nasdaq: AMZN) when most deemed it just another overvalued tech stock. We know how that investment turned out. Now, Miller's Legg Mason Capital Management owns big chunks in Beazer (NYSE: BZH) and Centex (NYSE: CTX), two homebuilders experiencing their worst operating environment in decades.

In the end, it's always best to perform your own due diligence. You don't want to fall victim to any temporary market shocks, selling too soon because you don't understand what you're getting into. The bargains are out there, and as always, good companies selling below their intrinsic value will surely rise again. The trick is to buy them before they do, and hang on until then.

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Fool contributor Sham Gad is managing partner of the Gad Partners Fund. He has no stakes in the companies mentioned. Amazon.com is a Stock Advisor recommendation. The Fool has a disclosure policy