How to Keep a Wealthy Mindset During a Bear Market

2022 has been a rather challenging time for all investors. Although stock markets are not as dramatically negative as they have been in previous bear market cycles, negative sentiment measures far worse than others. 

Despite the difficulties of this year, it is essential to remember you have a long-term plan for a reason, and your probability of long-term success improves when you maintain a long-term perspective (especially when navigating bumps in the market).  

So how do you keep a wealthy mindset when so much doom and gloom is monopolizing the headlines?

You select your thoughts each day the same way you select your clothes. So, it’s pretty simple. Select the right outfit for the occasion.   

Here are a few thoughts to help you out.

Remain Disciplined

Back in 2008, at the height of the Great Recession, Warren Buffett wrote an Opinion piece for The New York Times. In it, he explains that despite rising unemployment rates, scary headlines, and an overall problematic economy, he continued to buy stocks. His reason? "Be fearful when others are greedy, and be greedy when others are fearful. In short, bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price." 

Today more than ever, His advice remains relevant. And, helps to make this bear market a bit more…bearable. This isn't the first bear market you've survived (nor the worst), and it undoubtedly won't be the last. 

Like Buffett, we see opportunities in downturns (like buying assets at a discount while tax optimizing your portfolio) that will later pay off. Selling off stocks to minimize loss is counterproductive to building wealth. Instead, look for entrances instead of exits in bear markets. 

Buffett's secret? History repeats itself, and a recovery phase is coming. In fact, the average bull market lasts about 2.7 years. By comparison, the average length of a bear market is 9.6 months. Every bear market has been followed by a bull market that lasts longer and provides far greater gains. That means that for those with patience, time is on your side.

Avoid Making Emotional Decisions. Automate Instead.

To build wealth, you must reduce financial anxiety, which means managing your emotions. Maintain an optimistic outlook for your financial future, regardless of market landscapes. Regulate your attitude and reactions to challenging times to maintain confidence around your long-term investments.

We’re lucky here at HFI in that our clients understand these investing principles remarkably well. We work hard to keep them updated on the latest in the financial markets and they’re confident our stress and strength tests will see their portfolio through these ups and downs. 

But if you aren’t already working with us, we understand how daunting it can feel to continue investing your hard-earned wealth, even as you watch the market stumble. But trust us when we say: don't try to be a fortune teller. Timing the market will only lead to stress and loss. After all, it's not timing the market–but time in the market that is most important. Markets move in cycles; if you stay invested during the rough patches, you'll be suited for a positive recovery. 

Adopt a Big-Picture Perspective

When you feel anxious, reflect on your past 5, 10, 20, or 30 years. Remind yourself of the choices you made that led you here. You've done well! Thinking of all that I set out to accomplish always quells my anxiety and keeps my focus firmly on my future. 

We do not know what the economy will look like tomorrow, but we can have a plan to deal with the hand we are dealt. Looking forward 5, 10, or 20 years from now, we are confident markets will be higher. It is mission critical to have a steady, and strategic approach to wealth building.   

So, Now What?

We can't predict or control market volatility, but we can adopt an understanding that disruptions are temporary and won't lead to permanent losses. Hold on to your well-diversified investment strategy in the eye of short-term volatility and always invest in your future.

The truth is, navigating through these less than ideal market cycles is just the cost of being an investor. You can improve your compound return buying quality holdings at discounted prices. So, take a deep breath and remember your "why" – the things that motivated you to build wealth in the first place. Stay focused on your big-picture perspective, and keep investing in your future! 

Ted Halpern

President and Founder