Whether it is relative upside or reversal of paper gains, they are still gains because these gains can be realized when exercised. I am writing this week’s post because there have recently been fewer opportunities for investors to sell their holdings as we are still in a bear market. However, when there are small breaks in the bearish market, please take note of all unrealized gains from those spikes and sell them to regain confidence. Usually, we sell at an optimal price but in a bear market, our strategy must adapt to the high uncertainty and lower risk appetite.
Lock in unrealized gains when there are price spikes
Price spikes happen when you least expect but they are easy to identify. Basically, as long as you sense a shred of optimism in the market, that is when the price of some assets peaks in the midst of a bear market. That is not to say that it will always be the case but the market does provide traders to exit their positions even during bad times. So the next time the market shows signs of optimism without a valid trigger, do try to let go of some assets and take smaller profits rather than letting them slip.
Get back capital to divest into other counters to rebalance
During a bear market, it is highly possible for us to over-commit our capital to a few counters in hope that it will rebound faster than the rest. When that happens, always look for opportunities to rebalance your holdings. That means you should start selling some of your assets and divest in other stocks to average down on them instead. This can also add more value to your portfolio during the upturn and can only be executed during a bear market.
Sell first and buy back later for insurance
In my post shorting without shorting, I tried to explain that you should always sell first and buy back later so that you can earn the difference rather than always waiting for opportunities to buy low and sell high. This is especially important during a bear market because the overall trend is still heading lower. Thus, by selling, you will have a higher chance to buy back lower and make the difference rather than seeing your assets decrease in market value.
Closing thoughts
During bear markets, there will be opportunities to make money out of your holdings. That said, it will not feel the same but bear in mind that if you do absolutely nothing, the market might rob you of your opportunity cost and leave you with nothing left. Enjoy the bear market when everything is cheaper for it will not last as long as you might think but will only make you imagine how nice it would be for you to have bought stocks at the price it is at right now.
