Stock Market Advice for Troubled Times

Avoid Market Timing

Market timing is a difficult thing for even highly-paid Wall Street types to get right. When you consider that those professional investors have access to sophisticated tools, you can see just how difficult it is for the average investor to accurately predict when the current bear market will flip around and turn into a raging bull. Instead of trying to time the market, consider dollar cost averaging by investing the same amount of money month after month. You will gather more shares, and you will be in the perfect position when the stock market does finally turn around.

Continuing to invest during a bear market can be a hard thing to do, especially if you see your balance declining month after month. But investing during a bear market can provide you with exceptional returns down the road when the market really does recover. Investors often joke that stocks are the only thing no one wants when they are on sale, and in many ways this is true. If you can buck the trend and buy stocks even during the depths of a bear market, you can accumulate far more shares than you could have during the height of the just-ended bull market.

Keeping costs under control is important even when times are good, but high flying stocks can mask the impact of high fees. When those returns go down, the impact of those high fees becomes much more apparent. A bear market provides an excellent incentive to go through your portfolio and examine the fees you have been paying. Look for lower fee alternatives to each mutual fund you own to lower the cost of your overall portfolio.

You can use losses in the stock market to offset capital gains you have elsewhere. Use a bear market or temporary downturn in the stock market as an opportunity to dump some losing stocks and get some tax benefits. Take a look at the past performance of every stock and mutual fund in your portfolio. You will no doubt find that some are down simply because the market took a hit. But other stocks and funds might have started their decline long before the beginning of the current bear market. Selling those losers and using them to lower your taxes gives you a double benefit.