Surviving a Bear Market: We Share Our Top Tips

2022 seems like a lost year for investments, with stocks and bonds trending lower since the start of the year. What’s more, we’ve been in a bear market since June, and if you’re feeling a little weary and battle-scarred from this year’s market volatility, just know that you’re not alone.

While some of us at StashAway are experiencing our first bear market, our senior leadership team has weathered a few of them. Here, a few members of our leadership team share their experience navigating previous bear markets, and reflect on their successes and mistakes.

Michele Ferrario

Co-Founder and CEO, StashAway

Number of bear markets experienced: 3

Tell us about your first bear market and the decisions you made. 

I vividly remember the tech bubble burst, but I was in university and had no savings at the time. So my first big bear market was the GFC. At the time, I was a consultant in McKinsey’s New York office, and I was working for a bank client – so I was at the epicentre of what made the world economy collapse. I’d started to accumulate some savings, but I didn’t have an “investment plan”, and I simply waited a few years until things were clear and the crisis was over.

Looking back, I lost a gigantic investment opportunity. I was still quite young, and if I’d invested in a full-equity portfolio, I’d have made 600+% returns today – if only I had the foresight to invest as stocks were going down!

How did those decisions shape your reaction to the current bear market? What are you doing differently / the same?

I’m still “young” from an investment perspective, so I still have the luxury of being able to take “equity risk”. I don’t want to look back ten years from now thinking that I lost a great opportunity. I’m therefore investing with a weekly cadence. I perfectly understand that markets – and my portfolio returns – might get worse before they get better, but I also know that it’s impossible to invest at the exact bottom. That’s why I’m investing with a higher frequency as markets go down, to make sure I’ll be able to capture the eventual market recovery.

Advice for those going through their first bear market?

Invest with a frequent cadence into a diversified portfolio with a risk level that allows you to sleep at night. You want to avoid at all costs selling, or stopping investments, during very negative weeks and months. You’re better off with a more balanced portfolio if this means you’ll be able to stick to your plan.

Stephanie Leung

Co-Chief Investment Officer, StashAway

Number of bear markets experienced: 4

Tell us about your first bear market and the decisions you made. 

I try to study as many historical bear markets as possible, including the world's first bear market in 1692. But the first bear market I experienced was the tech bubble burst in 2000.

At the time, I was graduating from university as a computer engineer. Instead of getting the 15 job offers we were all hoping for, the most sought-after companies all cut back on hiring (if they weren’t going bust). Luckily, I was still early in my career, and I decided the best thing to do was to invest in my own education. So I went on to complete a Masters in Computer Science degree at Stanford.

How did those decisions shape your reaction to the current bear market? What are you doing differently / the same?

I think there are two types of bear markets: Those that only impact certain financial asset classes, and those that affect the broader economy.

Eventually, all of them come to pass, but the latter may have lasting impacts on your life if you’re not prepared. The current bear market is likely to be one that affects the broader economy, and we may see its impact in our personal lives as well. So take it seriously and make sure your finances are sound.

Advice for those going through their first bear market?

You don’t need to go through a bear market to take lessons from it – if we look at history, we can see that cycles often repeat themselves, and that market cycles are primarily driven by a rise and fall in liquidity.

For those going through their first bear market, a book I’d recommend is Ray Dalio’s Principles for Navigating Big Debt Crises, where he’s painstakingly documented over 50 cases of debt crises in the past 100 years.

Nandini Joshi

Chief Operating Officer, StashAway

Number of bear markets experienced: 4

Tell us about your first bear market and the decisions you made.

I started my first job in 2000, right as the tech bubble burst. I had joined Cisco Systems (in Brussels) after graduating in August, and during my probation period, Cisco’s stock went from $63 to $13! I wasn’t sure if I was going to keep my job.

Seeing my job hang by a thread so early on made me a saver. It also made me pay attention to my lifestyle choices. Real estate was what I understood well at the time, so I started to put money towards a real estate investment in India where I went 50/50 with my parents.

My engineering job gave me the opportunity to pick up weekend shifts, and I would cover at least two a month to improve both my skills and my paycheck. The money I earned from those shifts went straight into investments. I just never made it available for spending.

How did those decisions shape your reaction to the current bear market? What are you doing differently / the same?

Having gone through a few major bear markets, I’ve simply learnt to not react. Even during the GFC, I continued to invest because I knew that I had multiple decades ahead of me. Those investments have added a lot to my current net worth.

This time, I’m continuing to dollar-cost average into my public market portfolios (at a weekly cadence). But on top of that, I’ve also looked for new opportunities in private markets – I’ve started dabbling in art investment, and I’ve invested in StashAway Reserve’s private equity and venture capital and angel investing programme. I had exposure to the private markets through a previous job, but it was limited. This time, I’m giving it a proper allocation in my portfolio.

I’ve also increased my allocation to StashAway Simple by 15%. I now have 2 kids, and want to make sure I don’t have to touch my long term investments for however long this bear market lasts. It’s just what helps me keep my peace of mind.

Advice for those going through their first bear market? 

Whether it’s your first bear market or your fifth, bear markets seem long and the media can be distracting! If you have multiple decades ahead of you before your retirement, this is really an opportunity. Invest early, regularly and into a diversified portfolio. But also be mindful of lifestyle inflation. It’s very easy to look at other people’s lifestyles and get carried away. Learn to make conscious choices that add value to you in the long term, personally or professionally.

Alex Cringle

Chief Product Officer, StashAway

Number of bear markets experienced: 3

Tell us about your first bear market and the decisions you made. 

I was just beginning my professional career during the 2007-2009 recession and trying to settle into a banking career. Tough timing to say the least. My primary concern at the time was maintaining a job in an industry that was getting slashed!

I was also just getting serious about capital allocation in public markets. I dedicated a significant amount of time to learning more about history and different investment approaches in addition to creating my own plans.

How did those decisions shape your reaction to the current bear market? What are you doing differently / the same?

The decision to invest the time learning (which I continue to do today) and form my own views helps me make decisions that I can stand by with confidence, especially during present times when there’s a high volume of noise being produced. This helps me sleep better.

Advice for those going through their first bear market?

Invest the time to learn. Reading reddit forums for 30 minutes is not sufficient. Look at history. Use a variety of sources. Ensure your core needs are met first by allocating your capital in a way that ensures that. Use multiple sources of information for research. And lastly, don’t think you are smarter than the market.

John Tsang 

Former Financial Secretary of Hong Kong, StashAway advisor 

Number of bear markets experienced: 6

Tell us about your first bear market and the decisions you made. 

The first bear market that I encountered as an adult was in 1980, brought on by the Fed Rate Hike Recession. I had been living in the US since the mid-1960s, and was then working in the Curriculum and Competency Office of the Boston Public Schools. It became clear to me that the global economic regime was going through a seismic shift at that time, with the world’s economic centre of gravity moving to the East. It was then that I decided to return to Hong Kong, and began my career with the government.

How did those decisions shape your reaction to the current bear market? What are you doing differently / the same?

I’ve gone through five bear markets during my tenure in the HK Government in different positions of responsibility. Bear markets are a cyclical phenomenon that happens every four years or so on average. They aren’t something that you can seek to avoid, but what you can do is save for a rainy day and maintain a long-term view in your financial planning. 

Short-term decisions are usually wrong because you don’t have the necessary information to make sensible decisions. Never try to outsmart the market because most of us can’t. I have been keeping to this belief in the last half century, and having gone through these experiences over the years, I can calmly face these market ups and downs with certainty and confidence.

Most importantly, I can sleep well at night.

Advice for those going through their first bear market?

First and foremost, stay humble. The market is an unpredictable beast, so don’t seek to out-guess it, and don’t base your investment decisions on the vastly differing views expressed by financial experts in the media. History tells us that bear markets are normal parts of a market cycle, and markets do recover eventually. So make sure you’re diversifying your investment exposure and staying true to your risk appetite.

The bottom line

No two bear markets are exactly alike. But they happen often enough that the same lessons apply. And the one thing that all bear markets have in common is that – as Stephanie mentioned – eventually, they all come to pass, and markets have always bounced back.

To recap, here are our top 3 tips for surviving a bear market:

• Continue to invest with a regular cadence.
• Make sure you’re investing in a diversified portfolio.
• Invest the time to learn – a deeper understanding of how markets work will give you greater confidence in your investing decisions, and stand you in good stead to weather the market’s ups and downs.