(Stephon Walters)
Bear markets are interesting. On the one hand, no one likes to see the value of their investment portfolio plummet; on the other side, Bear markets It can present many opportunities for investors – especially if time is on your side. Instead of getting away with investing during these times, it can be an opportunity to find great stocks at a much cheaper price than their true value.
Here’s how to invest $10,000 in a bear market right now.
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You can’t go wrong with the S&P 500 Index
I am a firm believer that Standard & Poor’s 500 An index fund should be a staple in every investor’s portfolio. Since the S&P 500 tracks the 500 largest companies in the United States by market capitalization, it is often used to gauge how well the economy and the broader stock market are doing. With an S&P 500 Index Fund, investors can be confident that they are receiving essentially instant diversification. For example, file Vanguard S&P 500 ETF (NYSEMKT: VOO) It contains 503 companies covering 11 major sectors:
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- Communication Services (8.90%)
- Consumer Rating (10.50%)
- Consumer Goods (7.00%)
- Energy (4.40%)
- Finance (10.80%)
- Healthcare (15.20%)
- Industries (7.80%)
- Information Technology (26.80%)
- Material (2.60%)
- Real Estate (2.90%)
- Utilities (3.10%)
Of the $10,000, I would set aside $5,000–half of what I should invest–to the S&P 500 Index Fund.
Look outside the United States
No investment portfolio is complete without exposure to non-US stocks. You are doing yourself a disservice as an investor by focusing only on US companies; There are many greats global companies that make sound investments. As a general rule, about 20% of your portfolio should be in international companies.
I would like to focus on a total international fund, similar to Vanguard Total International ETF (NASDAQ: VXUS), which includes more than 7,800 companies in both developed and emerging markets. Developed markets have more stable economies and mature financial systems. Emerging markets don’t have as much developed economies as developed markets, but they tend to have more room for growth because of this. The Gross International Fund gives you the best of both worlds.
Out of the $10,000, I will allocate $2,000 to an international fund.
Don’t forget the young players
Investors are usually attracted to large companies because they are more stable, something they can provide some Rest during the uncertain times of bear markets. However, due to their size, larger companies tend to have less room for overgrowth. It is much easier to double your market capitalization when you are worth $500 million than when your market capitalization starts to reach $10 billion or more.
The bad news: beanie And the medium stock They tend to take more hits during bear markets. The good news: they tend to outperform big-cap stocks during the early stages of a bull market.
You never want to try to time the market or make an investment because you expect prices to rise, but downturns like the one we’re currently experiencing can be an opportunity to grab battered small and midsize stocks at a discount.” To reduce some of the risk, I’ll focus on small and medium-sized funds, style Vanguard Small-Cap ETF (NYSEMKT: VB) And the Vanguard Mid-Cap ETF (NYSEMKT: VO)Which includes 1,530 and 377 companies respectively.
Out of the $10,000, I would set aside $1,500 for a small capital fund and $1,500 for a medium capital fund.
Do not invest the total amount at once
Average dollar cost It is a great investment strategy to use in general, but it can be especially useful when you have a lump sum available to invest. Using the average dollar cost, you can set specific investment periods and stick to the schedule, regardless of how your stock performs during that period. Whether prices are high, low or stable, the key is to stick to your schedule and invest no matter what.
I will divide the $10,000 into four scheduled investments of $2,500 over a year, with each investment broken down as follows:
- Large Capital: $1,250 (S&P 500 Index Fund)
- International: $500
- Average Max: $375
- Small Capital: $375
This will help keep you steady and prevent you from trying to time the market.
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Stephen Walters He has positions in the Vanguard Mid-Cap ETF, Vanguard S&P 500 ETF, Vanguard Small-Cap ETF and Vanguard Total International Stock ETF. Motley Fool has positions in the Vanguard Mid-Cap ETF, Vanguard S&P 500 ETF, Vanguard Small-Cap ETF and Vanguard Total International Stock ETF. Motley Fool has a profile Disclosure Policy.