by Bernz Jayma P.
No investor looks forward to a bear market, but they are a part of the market cycle. Sot if you plan to be a long term investor in the stock market, t is better to plan how to survive the bear markets that you will encounter than to think you can avoid them. Here are some tips to get you through a bear market cycle with minimal losses.

The most important point to remember is: don’t give in to the temptation to sell low thinking that you will cut your losses. More often than not, this results in a permanent loss rather than the temporary loss on paper that a bear market often represents. Unless you desperately need the cash, its usually better to leave your stocks alone and wait until the market rebounds.

Instead, if you have the resources, consider the bear market to be a buying opportunity. If your strategy is long term, the bear market may prove to be a good time to invest in stocks that are down because of the overall market and not because of poor management practices. Of course, you will need to do the research so that you can tell the difference. But a bear market is good time to add stocks to your portfolio that you may not have otherwise considered when their prices were higher.

When considering buying stocks at their low points, it is important not to get greedy and confuse speculation with investment. A bear market is not a good time to purchase risky stocks thinking that you can make back your losses by having a big win when the market turns around. If the bear market persists longer than you expect it to, a risky stock is more likely to fall even further or collapse entirely if its company goes out of business as a result of insufficient cash reserves.

A better strategy when buying stocks in a bear market is to identify the companies which have long term performance histories and sufficient cash reserves to ride out a prolonged bear market if a worst case scenario happens. You will be better off investing in companies that are financially robust enough to withstand a long market contraction.

Also look for industries that are relatively recession proof, like food, health care, recycle and waste management. No matter what the market is doing, people continue need to eat and dispose of their waste. Health care is a necessity rather than a luxury. And recycling becomes a growth industry as consumer discretionary spending declines.

Author and entrepreneur Bernz Jayma P. is the owner of a financial blog dedicated to helping people expand their knowledge on personal finance. You may visit his blog at http://www.Invesmint.com.

Article Source: Bear Market Survival Tips