Skip to main content

Three Rules to Survive a Bear Market

Real Money's James 'Rev Shark' Deporre lists the keys to making it through big downturns.

The best way to deal with a bear market is to come at it from a position of power.

That’s the call from TheStreet’s James “Rev Shark” Deporre, who offers several ways to leverage and gain power over the roiling stock market, with power as your platform.

1. Forgo the Urge to Predict

When the market pulls back and acts like it has recently, there is a strong urge to make predictions about what will happen next. “There will be those that foresee a collapse and a long and brutal bear market, while others will see a fast reversal and be anxious to buy the dips,” Deporre said in Real Money.

The Rx? Just take it one day at a time.

“Don't be sucked into the prediction game,” Deporre said. “Manage your individual stocks and protect your capital. Be skeptical of bounces, and don't be too negative when there is more weakness. Let it play out. Eventually, the character of the action will shift, and you can put capital to work. A new uptrend will last months, and you won't miss out if you stay reactive.”

TheStreet Recommends: Top 5 Tips to Help Small Businesses Thrive In 2022

Scroll to Continue

TheStreet Recommends

2. Operate From a Position of Strength

When we don't feel like we are in control of a situation, we tend to make poor decisions. “The default position when we’re uncertain and confused is to do nothing,” Rev Shark noted. “Inertia sets in, and we tell ourselves it is too late to act.”

In a poor market, you must have cash, and you have to be able to sell and stay flexible. “That’s what gives you power,” he added. “It allows you to jump back in when you think the time is right, and it allows you to exit if your timing is wrong. The bear market can be easily tamed if you operate from a position of power.”

3. Don't Focus on Trying to Predict the Absolute Bottom

During a bear market, there is usually a strong urge to predict the exact moment that the market has hit bottom and will start to trend higher again. “That’s the issue that everyone is focused on, and it creates a tendency to act too early,” Deporre said.

The truth is, you can't call a bottom after the fact - you can only do it prospectively. “What happens is that the bottom callers are always early, and then they create another wave of selling when they are trapped,” he noted. “From a strategic standpoint, it’s often better to be late than early to a market turn.

“Yes, you will miss out on some early gains, but if you want strength, then there will be natural support levels that will help reduce risk.”

Get more trading strategies and investing insights from the contributors on Real Money.

TheStreet Recommends: 6 Tips For Starting a New Business