5 Genius Bear Market Investing Strategies

It’s been a rough start to the year for new and tenured investors. After hitting record closing highs in early January, both the benchmark S&P 500 ( ^GSPC -1.21% ) and iconic Dow Jones Industrial Average dipped into official correction territory (i.e., declines of at least 10% from their highs) in March. Worse yet, the growth-focused Nasdaq Composite fell into a bear market between mid-November and mid-March with a 22% drop.

Although bear markets are a natural part of the investing cycle, they can still be scary for a variety of reasons. For instance, the velocity of downside moves in the stock market often dwarfs upside moves — when the market begins falling, it tends to do so really fast, whereas moves higher are more gradual. Additionally, it’s impossible to know ahead of time when a bear market will begin, how long it’ll last, or how steep the ultimate decline will be.

Image source: Getty Images.

Despite these unknowns, putting your money to work during bear markets can be an exceptionally smart move. What follows are five genius bear market investing strategies that have the potential to make you a lot richer.

1. Play the long game

The first strategy is arguably the most important: Relax and play the long game.

Stock market corrections and bear markets are a normal and inevitable part of the investing cycle. Since the beginning of 1950, the S&P 500 has endured 39 corrections of at least 10%. This works out to a double-digit decline, on average, every 1.85 years. Even though Wall Street doesn’t follow averages, it gives you a good idea of how common double-digit percentage declines are.

However, the average stock market correction doesn’t last very long. Out of the previous 38 corrections (I’m excluding the ongoing correction since we don’t know how long it’ll last), the average length was only 188.6 calendar days, or about six months. If we narrow it down to just the past 35 years, which is when computers became common on the trading floor and disseminating information…

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