Prediction: A Bear Market Is Coming, and This 1 Investing Move Will Make or Break Your Portfolio
Key PointsThe stock market invariably pulls back now and then, often with a bear market ensuing.
A bear market is anticipated to arrive, but this should not cause panic. Stock market fluctuations are common, and the market, along with the economy, has always bounced back after each downturn. However, it is crucial to ensure that your funds are allocated appropriately. Recent years have seen the S&P 500 deliver annual average gains close to 10%, highlighting the potential for substantial returns.
Bear markets typically occur every 3.5 years, lasting an average of less than a year, according to Hartford Funds. Consequently, it is likely that a bear market will occur this year or next, but it is not expected to persist for an extended period. The key consideration is how to manage your investments during this period. Short-term finances, which you anticipate needing within five years, should not be invested in the stock market due to its volatility.
In the event of a bear market lasting three years or more, you would not want the accounts you intend to draw from to have experienced temporary reductions. For a more conservative approach, consider placing funds you'll need within ten years in less volatile assets such as high-yield savings accounts, certificates of deposit (CDs), money market accounts, and bonds.
If you're nearing retirement, you might consider shifting a portion of your portfolio out of stocks to reduce risk. However, it's important to remember that even with occasional market pullbacks, long-term stocks have continued to deliver significant gains. As long as you are prepared to weather any downturns, maintaining a significant portion of your portfolio in stocks can be beneficial.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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