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A bear market can be one of the best times to buy stocks. Yet, that’s all well and good to say, but when you see your shares fall lower and lower suddenly it doesn’t seem like that great of an option. However, there are some steps you can take, and stocks you can invest in, to make the bear market your friend. So let’s get right into it.
Reaffirm your goals
Before you start buying stocks all over the place, thinking they’ll all bounce back, it’s important to reaffirm your goals and risk tolerance. Are you hoping to use the cash you’re creating in the next few years, or are you saving for retirement? This can seriously affect your investment strategy, so make sure to look it over with your financial advisor.
However, everyone should have at least part of their investment dedicated to long-term goals. These are goals that are in the next decade, if not beyond. With that in mind, focusing on the long-term in this case can be a great strategy when looking at your goals.
From here, you’re going to want to look over your investments and create some diversification. The last few years, we’ve been focused on growth. Then during the bear market, you’ve likely shifted and perhaps even sold off your growth stocks, putting them into dividend stocks.
But these are short-term solutions. Unless you need the cash right now, then continue to stay the course and invest in a long-term strategy. This means diversifying in several ways. Not only different stock sectors, but also different types of investments. This includes guaranteed income certificates (GIC), bonds, and other investments that can help create a lot of cash, over a longer period of time.
Get defensive, and stay focused
Finally, if you’re going to focus on this long-term investment strategy of diversified assets in a bear market, get defensive. When it comes to investing in stocks, find defensive sectors that either do well during a recession or bear market, or at least come out strong on the other end.
These would include sectors like healthcare, industrials, energy, and finance stocks as well. I would consider choosing some defensive stocks and try out dollar-cost averaging. This means the same time each month, for example, you invest in these stocks no matter what. Over time, the price of your investment averages out. Sometimes it’ll be higher, and sometimes lower, but over all if you’ve chosen strong stocks you’ll see your returns climb higher and higher.
A stock to consider
One of the best options to consider are the Canadian Big Six Banks right now. These stocks have fallen during bear markets and downturns, but they bounce right back up afterwards. In fact, many reach 52-week highs within a year of hitting 52-week lows.
Of all the ones to consider, Canadian Imperial Bank of Commerce (TSX:CM) has been perhaps hit the hardest. Shares are down 19% in the last year, and it trades at 10.7 times earnings as of writing. You can then bring in a high dividend yield at 6.69%! And again, it’s a bank stock with plenty of provisions for loan losses, bound to bounce right back after this bear market. How do I know? Because it’s done it before in the past, several times over.
So certainly consider CIBC stock if you’re looking for long-term income that offers a defensive strategy for your goals. What’s more, you can bring in some extra dividend income in the short term. Whatever you choose, make sure to stay the course, keep calm, and consider investing in this bear market.