To prepare for a bear market, The Motley Fool says market timing rarely works and recommends modest portfolio shifts, checking tolerance for a 20%-plus drop, emergency savings to avoid forced sales and continued automatic investing if finances allow.
The article says a downturn could arrive within a year or not for 10 years, and warns that moving entirely to cash can lock in losses or miss gains after a recovery begins. It suggests partial changes, such as shifting some money from a tech ETF to a low-volatility ETF, while maintaining a long-term asset allocation.
For an emergency cushion, the article suggests Treasury bills or another low-risk option. If investors’ finances remain unchanged during a downturn, it says they can continue automatic contributions to 401(k)s and other accounts, buying more shares at lower prices and potentially improving long-term returns.
