5 Lessons on a Bear Market


The Philippine stock market is really depressing today. With the drastic downturn in the economy, all IPO's have been affected resulting to an all-time low for several days.

A 25% loss on my stocks is alarming! This is not to brag but to show my real losses. My investment is quite small for now.

For those of you who haven't invested in stock market yet, you can read my articles: You Don't Need to be Warren Buffett to Invest in Stock Market, How to Open an Account with ColFinancial and Offline or Online Stock Market Trading for introductory guides.

Take note that you can start investing for as low as Php 1,000!

Based on the reports, the reason of the bearish market is due to Federal Reserves development and decrease of exports to China.

As an underdog economy, Philippines is always (and forever will be) affected with the major economic players - US and China.

This is nothing new. The stock market is like a roller coaster - it goes up and down. Sometimes positions are prolonged that you don't have any idea how soon it is to change.

This evokes us personally and leads to valuable lessons to be learned as a hardcore investor.

Lesson 1: Stock Market is Always Changing

This is nothing unique. A cliche that remains to be true in whatever case may be.

Considering that it's a business, chances are risks are always on investors' side lurking somewhere and waiting to attack. The challenge is how to counteract risk to go on your way. Bottom line is the acceptance part - knowing that nothing lasts forever and how to act on changing times.

Lesson 2: Patience

I agree that this is the most important attitude investors must have. Without patience, there would be no businesses and investments made at all. Backed up with guts and boldness, nothing can be sturdier than a man with the ability to wait a better yield. For as long as we are certain with something, nothing can get in the way and block our roads to the future.

Lesson 3: When You Lose, It is Time to Buy More

The binary results of stock market makes it exciting and predictable. You either win or lose. The point is, investors are not really losing their money in the stock market during bearish times but the value of their assets.

Even if the price per share of that company reaches 0.01, that is nothing to worry about.

If the cause of sudden decline is by chance or temporary like a crisis or major disaster, still the investment value is intact and the value may rise again after recovery.

While it's really tough being broke, this is really the best time to buy MORE stocks. The cheaper it is, the higher is the potential for earnings. And this is where we find real bargain.

Lesson 4: Losing is Part of a Long-Term Investment

As what I have written before, Investing is different from trading. The objective of the former is long-term appreciation, while the latter is short-term. Ergo, no rush is expected in investing since the goal is to grow your money in 5-10 years. And with that span of time, there will be surprises & setbacks that we wouldn't know and we should be proactive in dealing with it.

Lesson 5: Losing More is Earning More

When a stock is depreciating badly, for some it is a signal to get rid of that stock as soon as possible - minimizing loss. However, that trick is far no wiser. To cut losses is a stupid mistake. When prices go down, it is the best time to buy, as stated in Lesson 4. Far from it, the earnings also skyrocket the moment it bounces off and rise to its peak!

There's a significant difference already when you buy 100 shares at Php 10.00 versus Php 5.00. When the price climbs up to Php 15.00, how much will the profit be between the two? For the former, just 50% or Php 500.00 (100*15 - 100*10). But the latter is 200% or Php 1,000 (100*15 - 100*5). That makes sense.

Being an investor is not just about the money.

But way better than that is the attitude that you subconsciously develop along the way in times of defeat and trouble. It also hones our skills in decision-making and being street-smart.

When you lose, you'll surely find ways to earn MORE again than what you have lost.

One more thing, the real personality appears when your own money is at stake. And when upon self-discovery some attitudes are found out to be against your will, you can always change. We can always change.


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