15 Things to Do if You're Worried About a 2022 Bear Market

After the market briefly dipped into bear territory a few weeks ago, many investors are antsy and wondering whether another full-fledged correction or crash could be on the horizon. If you’re worried about the potential of another bear market in 2022, read on to find what you absolutely should (and shouldn't) do in the event that happens.

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It's one thing if something has fundamentally changed about the business you own, or leadership is decisively taking the company in a different direction that has changed your underlying thesis about the stock. However, if your reasons for selling a stock come back to share price factors only, consider carefully.

Selling a stock because shares have retracted without any specific changes to the business itself could produce even greater losses for your portfolio. Not to mention, you could easily miss out on a healthy rebound when the market bounces back.

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Bear markets or periods of correction in the market tend to produce a wide array of investment opportunities for long-term investors. Even so, if your cash position is tight, make sure that you're not putting any money into the market that you would need to pull out in the next year or so. It's better to sit back, wait things out, and make sure your nest egg is adequately shored up than it is to invest money that you might be forced to cash out during a less-than-ideal period in the market.

It's an old mantra, but it holds in true in any market environment, particularly during bear windows: A strategy of diversification is one of the most important game plans you can implement as a long-term investor. By ensuring you diversify your capital across numerous industries, sectors, and types of stocks, you can also reduce the level of risk present in your portfolio and ensure a more adequate balance between the higher- and lower-volatility stocks you own.

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You don't have to follow a complicated series of steps to become a truly great investor. The tried-and-true method of dollar-cost averaging -- investing a set amount of money consistently regardless of whether the market is up or down -- is a fantastic approach to take in any environment, particularly if you find that you're more prone to emotional investing.

By setting aside a specific amount of money to invest in all markets -- bear, bull, and anywhere in between -- whether that be $500, $1,000, or more each month, you will not only put yourself in a position to realize significant portfolio growth over the long term but also be able to take advantage of prime buying opportunities when other investors are stalled by fear.

If your current portfolio is composed of stocks across sectors that tend to experience higher bouts of volatility -- tech, for example -- there's nothing wrong with putting your cash toward less cyclical sectors that might experience lower levels of growth but also lend more stability to your holdings. Sectors like healthcare and consumer staples are just a few examples of more stable sectors abundant with investing opportunities that tend to experience lower levels of volatility during bear market periods.

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As part of your diversification strategy, consider investing in income-producing companies. Businesses with a solid history of not only paying out but raising their dividends in a variety of markets can provide a welcome safe harbor during market storms plus generate additional capital to save or invest.

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Here's the thing: Investors often feel as though they need to take certain actions during a bear market in order to be a successful investor. The truth is, there's no secret sauce. Investing consistently in great businesses is key, during all markets and periods in the market.

That being said, if you don't have extra capital to deploy or you just don't feel comfortable touching your portfolio right now, the best thing to do may be absolutely nothing. In particular, if you find that your investment style tends to be more reactive, leaving your stocks alone until you have more cash to put to work or your emotions have subsided may be the single best thing you can do for your portfolio.

Warren Buffett's famous saying about being "fearful when others are greedy, and greedy when others are fearful" is regularly quoted during down periods in the market. The simplicity of the message doesn't make it any less effective. If you have the cash on hand to invest during down periods, you can score some incredible deals on quality businesses that are temporarily trading down when other investors may be too hesitant to act or are otherwise trying to time the market.

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Worried about what a bear market could do to your portfolio? Well, having an insufficient emergency fund could pose an even bigger threat to the health of your portfolio. While bear markets come and go, if your rainy day fund is lacking and an emergency strikes, you could be forced to liquidate part of your portfolio at an extremely inopportune time.

In short, you shouldn't be investing at the expense of your emergency fund. Ideally, you'll regularly add to your emergency fund and your portfolio, and if you're unable to do both at once, there's nothing wrong with getting your savings in a better place before you put more cash toward your portfolio.

We live in an incredibly exciting time of innovation like the world has never seen, and that brings with it plentiful opportunities for investors of all ages and trading styles. However, during down periods in the market, it can often be tempting to chase the latest trend or shiny thing that has investors hyped.

Investing is a learning journey. Just be sure that before you invest in a company or industry, you understand it and there are durable tailwinds behind it to drive consistent future growth.

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During a period of down weeks -- or months -- it's easy to get caught up in the day-to-day machinations of the market. But consider that the market regularly experiences a correction about every couple years.

Bear markets are an expected and unavoidable component of a cyclical market that can't be timed or predicted. Therefore, the only way you can ensure that your portfolio grows and can benefit from the up as well as down periods in the market is to invest regularly and consistently with a long-term, forward-thinking mindset.

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While the aim of most long-term investors is to beat the market over time, investing with that singular goal in mind could lead to some painful investing choices. There are few things that one can reasonably and consistently predict about the market.

Rather than trying to time the most opportune market moments, which you can't control, investing regularly in great companies with strong leadership and diverse businesses and staying in the market through its ups and downs is how you achieve market-beating returns over the long run.

Another crucial aspect of your investing journey is to become well acquainted with and regularly revisit your investing risk tolerance level. The level of risk you're comfortable with will likely change over time as you meet and set new personal financial goals, but it's also key to guide your stock buying decisions during both bull and bear market periods.

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Exiting the market during a bear period and waiting for the right moment to get back in is a game of chance that few (if any) investors have a real chance at succeeding at. Rather than leaving things to chance (because who wants that?), staying in the market throughout its up and down cycles takes the guesswork out of the picture. Consistency and longevity as an investor wins over market timing any day.

Think of the next bear market as a prime opportunity to buy more of your favorite stocks on sale or invest in new companies at bargain valuations. If your nest egg is in good shape and you have the cash available to use, putting it to work during a down period is how you strengthen and grow your portfolio over the long term.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

It's been a bumpy year for stocks across a wide variety of sectors. Factors like inflation, a war in Europe, supply chain issues, and a tight labor market continue to produce challenges for a myriad of companies and industries. Even so, strong businesses with fantastic leadership and robust competitive tailwinds abound. These factors present abundant opportunities for the shrewd investor with a long-term mindset and the patience to wait out the volatility.

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