It isn't rosy in all Wall Street research departments.
Citigroup analysts are predicting a "full-on bear market" within months based on historical trends, according to a new note by equity strategist Robert Buckland. Here's how you can protect your portfolio.
Assess Your Risk
Most everyone will suffer losses in a bear market (short-sellers are winners, of course), but investors can decide now for themselves how much they are willing to risk says certified financial planner Alexander G. Koury of Values Quest, Inc.
"The first thing to do is check the current risk of the portfolio," Koury said. "This will help the investor determine what would be the worst case scenario if the market were to go into a bear market. That means an investor will know how much they're willing to lose of their portfolio, and they can determine whether or not that is comfortable for them."
Investors who don't plan to make withdrawals from their portfolios for decades could leave their investments be until the next bull market, but investors planning on retiring soon might want to limit their exposure. Koury recommends that investors should seek the help of either a financial planner or software to see if a reallocation is necessary to help them meet their goals.
Set Aside What You Need To Live
In addition to limiting their exposure to equities, retirees and other investors living off of their portfolio's returns also should prioritize their living expenses over investing when the market's down.
"If you are taking income from your portfolio, always be sure you have a couple year's worth of withdrawals in money market or short term bonds," said Edward Snyder, certified financial planner at Oak Tree Advisors. "The rest of your portfolio should be diversified among major asset classes, including intermediate term bonds. This should allow you to ride out a down market without having to sell stock investments while the market is down."
Mentally Prepare Yourself
Your own bad investment decisions can cost your portfolio as much as market losses, certified financial planner Patrick Amey thinks.
"Prepare yourself emotionally to 'ride it out' and tune out the noise," Amey said. "Yes, your portfolio will go down in value. But you have the cash you need so you can give your portfolio the time it needs to recover. Stay consistent with you allocation and don't make knee jerk decision."