by JMH Advisement, LLC

Inflation is directly affecting all American families, as well as, all major U.S. stock indexes which have “flirted” with or succumbed to the bear markets. A bear market is generally considered to occur when an index or an asset’s price has declined more than 20% from a recent high. With all this bad news, it justifies the strong speculation that, in fact, the dreaded recession is already in play, particularly, as the Federal Reserve is ramping up interest rates in recent weeks and may continue to do so during 2022.

“Market volatility is likely to continue throughout much of this year because of the high level of uncertainty,” says Sameer Samana, a senior global market strategist at Wells Fargo Investment Institute.

What should small investors do in such uncertain times?

1. Do not “Panic” or be “Blindsided”

As a small investor, when the stock market is down and entering a bear market, the first thing investors need to remember is that bear markets have shown to be an inevitable occurrence in the stock market. This can be an opportunity to make this the “best-time” to not only protect your portfolio but potentially position it for exponential growth. Buy low and sell high, not vice versa. Not every stock that drops in price eventually rises again, however, history has shown us that the major indexes -- such as the S&P 500, Dow Jones, and Nasdaq Composite, and the market as a whole tend to bounce back eventually.

2. Focus on “Diversification”

“Don’t put all your eggs in one basket” is a relevant saying in many aspects of life, and investing is no different. Diversification is one of the main investment pillars, and any solid portfolio should have a fair mix of assets. This is critical to reducing some of the risks that come during bear markets. You may not experience the hypergrowth that can happen with single companies, but you’re also not totally exposed to sudden drops that can occur.

3. Use “Dollar-Cost” Averaging: 

It can be hard not to let your emotions get involved when dealing with money under normal circumstances, but this is especially true during bear markets when you’re seemingly losing money. To help with this, investors can begin “Dollar-Cost” Averaging, which involves making regular investments at set times, regardless of how stocks are performing at
the time.

Most importantly speak with a financial advisor you trust who can help you manage your assets during this difficult time.