Patrick Iturra Report, April 25, 2022
Morgan Stanley is a renowned American multinational investment bank known for its financial services. It is amongst the top 40 wealth management firms.
Words from Morgan Stanley come out as one of the best financial advice for those looking into investing and buying stocks.
A recent statement from Morgan Stanley has been creating hype in the stock market about the “Bear market rally.”
In case you are unaware, a Bear market rally is a sudden or rather sharp fall in investment prices that is short-term. It is difficult for investors to judge and make decisions about their investments.
How long does a bear market rally last?
Since a bear market rally is short-termed, investors need to consider how long it will last to benefit from it. The average length ranges from 9 to 12 months—usually less than a year.
During that period- when stock prices go down suddenly, investors tend to get stressed sometimes. But, if financial management agencies can assure you about it being short-termed, that gives you a breath of fresh air.
This is what Morgan Stanley has highlighted about the past few weeks; the sudden fall in stock prices is over—assuring investors of their investments.
How does the Bear market rally affect the stock market?
As an investor, you are always keen on the best time to buy and sell stocks. As share prices go down during a stock rally, you’d want to buy more shares than sell them at a loss.
If predicted rightly, a bear market can give a lot of benefits to investors. Usually, the stock rates can go down to as low as 20%
The main reason for a bear market remains recession. When the inflation rate goes up, and recession takes a spike, analysts start predicting a bear market rally shortly.
Morgan Stanley’s advice to investors on the recent bear market rally:
Last week, Wilson from Morgan Stanley stated how the current bear market rally is over.
“The bear market rally is over,” said Wilson. He then continued with how it was already predictable that this was a bear market rally. Wilson suggests investors invest in defensive stocks.
Defensive Stocks are consistent and have a dominant position in the market even in times of market crash. For example, gas, electricity, and water. These are utilities that people need at all times. Even in times of the worst recession, these stocks can be a good catch in your hands if you’ve invested in them.
Why you should invest during a bear market rally; Not be afraid of the ups and downs:
Investment during a fall in the stock market can create uneasiness among investors. But financial advisors suggest you should not be afraid of the current ups and downs in the market and continue with your investments, here’s why:
· The stock market has seen that even though the bear market rally seems scary to investors, it does bounce back. The period may be prolonged sometimes, but once the rally is over, you are in control again, so you shouldn’t stop because of this short-term downfall.
· A bear market can be an excellent time to buy stocks with a visible drop in value. While most investors think the bear market is only bringing loss to them, it can be a good time for you to gain more in the future if you think strategically.
· People invest in stocks during a bear market rally that pays dividends. Dividends are a sustained benefit from stocks you’ve invested in.
Best strategies for investing during a bear market rally:
While a bear market rally may seem dreadful for investors, you can still work on the best strategy during a stock rally.
1. Play Defence:
This is one of the best options to maintain your position in the stock market. A defensive strategy will ensure your investment is stable even in the worst market times. The companies you’re investing in are extensive with a long operational and cap history.
Defensive stocks come from companies that cater to the basic needs of consumers.
Such as food, healthcare, gas, electricity, and water companies. Because of consistent demand, These companies hold a solid financial position, and even during a bear market rally, the investment in these companies doesn’t bring loss to investors.
2. Automating your investment:
Strategic investors go automated with their investments. By automation here, we mean using a pre-planned and programmed investing decision. The decisions are made based on algorithms provided by customer information. Automated investments are digitally made on different platforms that suit the investors.
Automation is your best friend when it comes to time management. The amount of time an investor spends averaging the loss and profit from a stock is a lot more than we can imagine. Automation saves time and ensures investors the advantage of the dollar-cost average.
3. Be vigilant about the bear market:
Most investors get stressed during a bear market rally and run away from the stock market, selling all their stocks before the market crashes. Financial advisors suggest you “hold onto your stocks” in such times. Selling at the time of a bear market rally is considered “forced-selling,” and a forced sell-off is not beneficial in the long run.
4. Put options:
A “Put” in finance is an option contract that gives you an option to sell particular shares at a specified price. For example, if you have invested in XYZ company with a share price of $100, the price falls to $80. You could use the option and sell the shares at $100 and benefit from it.
This is also considered a defensive way to invest your money, As the money you invest is secured by a contract.
5. Tolerate risk:
Investors can face high-risk situations during a bear market rally, but it will be easier for you to tolerate risk if you’re stable with your strategies and have the know-how of market rallies.
You can always minimize this risk by investing in more prominent companies with long-term stability.
As an investor, your main goal should remain consistent no matter how bad the circumstances. Running away should not be an option. Bear market rallies can be intimidating for starters; But once you’ve been through them repeatedly, you get used to dealing with the risk; this makes it more stable.
6. Diversification in investment:
Investment can be of various types, and if one does not seem to be working for you, you can look into what may work out well for you. What other forms of investment can you look into? Here are a few ways you can consider investing in:
· Bonds: Investing in bonds can be good when the stock market fluctuates. To say that you must not invest is surely not a wise idea; looking into more stable investment plans is what you should be thinking about.
· Assets investment: Investing intangible assets like real estate can be beneficial in the long run. Tangible assets are not only a safe investment source but also add up to your equity.
. Dividend-paying shares: Stock companies that pay dividends to their shareholders are investments that ensure return, even when shares are rallied.
Investment can be trickier when the market hits a bear rally; strategic investors always think long-term. Markets fall and recover from it; financial management companies predict this bounce-back in advance.
Understanding the bear market is the foremost thing that you as an investor must do; Once you know how things will go, you are less likely to react aggressively and be intimidated by the situation.
Seek professional advice from investment advisors if you need to. Financial management agencies can predict bear market rallies way before they hit the market.
Find good strategies that work for you; strategic investment is always more fruitful and minimizes risk. For example, Investing in more stable, more prominent companies will help you with stability in the market.
Being a strategic investment advisor for the past 25 years, I have worked with multiple clients to generate long-term wealth. My specialization is in real estate investment, Where I guide you through picking the right real estate property that generates returns/passive income over some time.
Feel free to ask me any questions about investing. I am here to help!
Patrick Iturra, Asset Manager at Estate Investments Group
Business development is the ideas, initiatives, and activities that help improve a business. My experience results in your business’s increased revenue, expansion, and profitability by building strategic partnerships and making strategic business decisions.