Always be careful of how you invest during a bear market. Rallies happen, but rarely are they a sign of a meaningful bottom, especially if there is no end in sight to the economic problems. Sometimes the rallies look promising and powerful and the pundits come out of the woodwork to “call the bottom”, in retrospect, of course. But markets don’t bottom overnight. It is a constructive process that can take days, weeks or even months and years.
Don’t rush to invest large sums of money you can’t afford to lose in a bear market. Remember that most money managers lose money in bear markets and they are professionals. Unless you have a lot of experience and a lot of spare cash burning a hole in your bank account, don’t speculate too much. A prudent approach would be to invest 5-10% of your income per month in a value-based diversified international mutual fund or ETF. That way you aren’t attempting to call a bottom and contribute regularly when the market is in the process of revaluation. This approach works with one necessary future component. Growth.
Don’t get caught up in the emotion and get stuck on the wrong side of the rally’s collapse. Technicals help, but are not perfect in this kind of market. Remember that there are plenty of charts on the bottom of the sea, right along with the ships whose navigators trusted them. Always watch your positions and use stops. I don’t feel we are at a bottom yet as the economy stands to deteriorate significantly.
