25 Essential Bear Market Stock Tips For Investors

Last week the stock market free fell more than 18% as investors tried to navigate a bear market that has ripped through not only the US but the whole world. What are investors supposed to do?

Pros like World Record Holder Dan Zanger advise moving to mostly if not all cash and simply waiting out the storm. Other pros like Warren Buffett recommend investing for the long term and rolling with the market punches.

With many ideas available for investors today, I have created a list of 25 tips to refer to during a bear market. Not all tips may be relevant to your portfolio but hopefully they will offer some fresh ideas, starting with..

  1. Don’t trust ratings systems. In a bear market every technical indicator or trade signal is free game for failure.
  2. Consider lowering the overall risk of your retirement accounts by moving into more conservative funds.
  3. Temporarily stop automatic investments into mutual funds.
  4. For any new positions on the buy side, use tight stop losses of 2 – 4% max vs a 7 or 8% standard during a regular market.
  5. Don’t buy into analyst recommendations.
  6. If day trading, take any profits quickly.
  7. For bigger single day market moves of 5% or greater, consider the opportunity to move your portfolio into more cash by selling bad positions.
  8. Larger defensive stocks with a high yield historically weather the storm much better than growth stocks and the like.
  9. Consider buying ETFs that are short the overall market, QID for example. View a full list of 40 great short ETFs.
  10. Don’t play the, “I have a feeling the market is done selling” game and try to catch the bottom.
  11. Remove any margined positions.
  12. Don’t buy any more positions on margin.
  13. Three heavy distribution days in a row for the market means go away. Unfortunately if you are reading this post then you may have already missed this opportunity to get out.
  14. Three consecutive heavy accumulation days during a bear market means test the water with extreme caution, don’t jump right in.
  15. Cash is king. Take advantage of FDIC insured high yield savings accounts and sleep a little better at night.
  16. It is a fact that three out of four stocks follow the overall market trend.
  17. If your investment advisor can’t send over a list of all of your current positions and tell you your exact portfolio status he/she shouldn’t be in control of your retirement.
  18. For new investors, understand this is not the time to be getting your feet wet to “see what happens”. Being on the sidelines for a few more months is a very smart move.
  19. Don’t hold onto bad positions, learn how to sell a stock you love.
  20. It is a fact that during the 2000 – 2002 crash analysts were making 10x more buy recommendations than sell recommendations on stocks. Don’t fall for it.
  21. The bigger your ego before the bear market, the greater the fall during the bear market.
  22. During the 2000-2002 crash multi millionaires were made by selling stocks short on weakness.
  23. Typically the biggest market leaders during a bull market are some of the biggest sellers during a bear market.
  24. Remember to think long term. The 2000 crash lasted about two and a half years, and while no one can predict the severity of the current bear market historically we always come out.
  25. Keep educating yourself. Take time to keep up with the news, talk with friends, and read investment books. Especially for young investors the opportunity to learn is critical for the future.

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  1. says

    Blain – great post. For me points 6,10,11 & 12 should be tattooed on my forearms :???:

    In fact Friday I fell for #10, despite all my years (nearly a decade) of trading and studying markets. Sometimes that beast called Greed gets in your head.

    The only comment I would add is “Don’t trade without an edge.” There is no edge in this market. Right now any play is nothing short of a gamble.

    Again, good stuff.


  2. Matt says

    13 says it all for me, I saw the 3 consecutive distribution days, just ignored them! Great post Blain.

  3. says

    Adding to point 9 on short ETFs If you would have bought SDS back even three weeks ago you would be up over 80% right now today. Definitely money to be made there.

  4. says

    I almost posted on that topic alone, there were multiple 3 consecutive distribution day sequences. I ignored the first few myself!

    Finally went 80% cash on August 12th and thanking the stock gods for it each and every day :grin:

  5. kanerd says

    rhino check out the reversal on SKF yesterday, the ultra short financials ETF has run sky high once again! Can’t believe it actually broke $200. Seems these ETFs are not even close to being relative to the index they are tracking.

  6. kanerd says

    Really nicely done post here, fantastic information and a strong reminder of just how stressful bear markets really are for all of us as investors.

  7. says

    Ya the first time SKF broke $200 was totally overdone, and that free fall from $204 to $160 on 7/16 was absolutely ugly.

    Even the QID has soared to not relative price levels. DUG the same, etc.

  8. RayJMan says

    yah rhinodude47…..awesome call
    got burned on buying srs last year when it was bullish (for one day)
    so i bought UYG on the HUGE run up when SKF hit 180

  9. RayJMan says

    good article Blain
    on #6
    some of us have “unsettled trades”
    i know….bad
    sell calls or buy puts……
    least risky is to buy puts to lock it in IMHO if you cannot sell unsettled “stuff” right away

  10. Matt B says

    Hi Blain,

    Great post and great site. There is always something interesting to read on here. With regard to point number three, my strategy has been to keep investing and to not stop my automatic investments (401K/IRA). I’m only 26 and have a lot of time to make up for my portfolio’s recent loss in value. To me the only thing worse than losing money in a down market, is not being in the game for the upswing.

  11. says

    I love your advice about not holding onto a stock just because you love it. This is something many struggle with, and I have seen it cost them a lot of money. Thank you for the great stock tips!

  12. davidfertello says

    market club mentioned your site. I love It, but! on my attempt to print out the inverse E.T.F. pages, page 1 ,the first 12 on the list is plank????????

    thanks, david

  13. says

    Just found your site and most of this is good, but this:

    3. Temporarily stop automatic investments into mutual funds.

    If you didn’t do this last fall, this is just plain dumb. It’s impossible to be certain where a bottom is we could be at one or we could go down another 4,000 in the DOW. Even if the market drops another 4,000 points you have already missed 60% of the drop from it’s high if you were in cash, which you should have been. Now is when you should be taking bits of the market (not suggesting you go all in). See your #25.

    In 3-4 years everyone will be saying, “why didn’t we buy in the fall of 2008?”

  14. says

    If day trading, take any profits quickly – This is so true, you can’t wait when you are profit. The day trading game is you enter and exit fast and stop loss is important, you must exit a trade with a loss if you have to


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