The bull market for stocks, at more than five years of age, already is one of the longest in history. So it would be wise to be ready for the next bear market before a stock market freefall happens and clouds your judgment.
U.S. News & World Report columnist David Ning offers three pieces of advice likely to echo during the next bear market that you should ignore.
1. "Someone will claim that buy and hold is dead, . . . and that you need to time the market to be successful," he writes. That's bunk. Most investors who try to time the market get burned, Ning notes.
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2. "Financial pundits will say that this time is different," he says. "Don't let anyone fool you into thinking that a drop in stock valuations is permanent." Stocks have rebounded from every past decline. "Unless there's a catastrophe that permanently wipes out huge parts of the world, betting on the world stock market coming back to new highs is a very sure bet."
3. "Everyone will tell you that you had too little in bonds," Ning writes. But it's in bear markets that you should build your stock portfolio, so that you're buying low.
Many experts say the stock market is overdue for a correction, as the S&P 500 hasn't dropped 10 percent since October 2011. On Friday, the Standard & Poor's 500 index lost 5.52 points, or 0.3 percent, to 1,925.15. The index fell 2.7 percent for the week, its worst weekly performance since June 2012.
Brad Lamensdorf, manager of the AdvisorShares Ranger Equity Bear exchange-traded fund, tells
Yahoo that a 10 to 20 percent correction already has begun.
"A lot of correcting is starting. It's just a matter of what it's going to take to get everybody scared enough to form a bottom," Lamensdorf notes.
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