As share prices usually trend downward during a bear market, this allows investors to sell the call options and receive a premium.
As long as the share price doesn’t rise above the strike price, investors will earn the premium as income.
5. Increase your investments during the recovery
In every recession, there is also a recovery. When the economy is moving from recession to recovery, investors should adjust their strategies.
This includes increasing your investment portion to ride on the market recovery cycle.
The downside risk is the difficulty to timing the market recovery.
This is why investors should consider deploying this strategy with the other 4 strategies above to hedge the downside risk.
Bear markets can provide the best opportunities
While a bear market is a difficult time for investors to make rational investment decisions, it also coincides with the best opportunities.
Whether you’re a long-term investor looking to buy into a high-quality assets at a discounted price, or a trader who wants to take advantage of the different market thematics to profit, there are opportunities for you to thrive in a bear market.
There is, however, a need to act cautiously, remain vigilant in your investment decisions and minimise the involvement of your emotions in decision making.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.