Wednesday, July 2, 2008

It's A Bear Market, What To Do Now?

Today the Dow Jones Industrial Average and the Nasdaq officially hit bear market territory. A bear market simply means that an average is 20% below its all time high. That's right both the Dow and the Nasdaq have hit these lows on the same day as oil climbs to new heights! So what should you do with your money that you have invested in the stock market. Well, it is really quite simple... You should do little or nothing. No one ever made a profit selling at the bottom and anyone that has an outlook of more than a couple years should be adding to their positions not selling them at the worse point possible! You should be selling when the times are good and buying when the times are bad, it is just that simple.

Sure the economy is in the tank and oil is crippling business and consumers alike, but it won't last forever. A lot of the rise in oil has to do with a weak dollar which was caused by the federal reserve lowering interest rate to help stimulate the economy. Don't get me wrong, the Federal Reserve did the right thing, they were just a little late to the party. A lot of speculators have been pumping up oil prices too, which only makes things that much worse. The public will only take it so long, before they demand action. The oil bubble will then weaken and will in turn make the markets skyrocket back upwards. Take a look at a 20 year chart of the Dow Jones Industrial Average below...

As you can see we have had corrections like this before, but the general long time trend has always been up. So let's say this time is different and oil continues to ride high. Well you should have protection, which means you should have alternative energy stocks in your portfolio. You know that with these outrageous energy cost, solar, wind and geothermal plays become all the more economically viable. Focus on the future of the world and not the past, just look at how investors did with Google, and they are just getting started! With a Democrat (most likely) coming into office you can bet that there will be some major government subsidies for all these alternative energy plays as well!

So whatever you do, don't get caught up in the selling panic and liquidate your portfolio. Even if the market continues to go down a bit more, or we even see a sell off that triggers the capitulation that everyone loves to see. We are very near the bottom and we are also very near the economic reign of terror by George W. Bush. I think history will look back at this as one of the greatest buying opportunities... Just do your research, don't buy all at once and you should do fine. Your kids will thank you...


  1. So true, everybody always freaks out when the market goes down, but then forgets to sell when things are good! Investing 101

  2. I agree with anonymous , one of my friend is making 15% to 20% investment in bear market.