5 Quick Facts Gen Z Need to Know About Bear Markets

The bear market that hit Wall Street last week comes with different challenges for different investors, with young people generally better equipped to deal with them as they have more time to wait for the rebound. This does not mean Generation Z however, investors should ignore it because it is not serious.

See: Should you “buy the dip” during a bear market – or wait?
To find: How long do bear markets normally last?

As CNN Business recently reported, this is brand new territory for most Gen Zers. Many started investing during the COVID-19 pandemic because they were out of work, had plenty of free time, and had access to money through federal stimulus programs and increased unemployment benefits.

They have mostly seen their investments increase in value – until this year, when stocks began their long slide into a bear market. Now Gen Z investors need to figure out how to handle their first market downturn.

If you’re new to the bear market, here are five things you need to know to make sure you weather the downturn in good shape.

1. Bear markets happen all the time

On average, bear markets occur about every three and a half years, according to Frank Holmes, CEO and chief investment officer at US Global Investors. As a young investor, it’s a good idea to prepare for when they happen, because they will happen. To help cushion the blow, make sure your portfolio is diversified enough to handle market downturns. In a column for Forbes, Holmes said he recommends a 5% to 10% weighting in gold and mining stocks and ETFs.

2. But they usually don’t last that long

According to the formula, bear markets typically last between nine and a half and 13 months. It may seem like an eternity for someone in their twenties, but over a lifetime of investing, it’s barely a drop in the ocean. Bear markets are generally shorter than bull markets, and in the long history of US stock markets, bears are always followed at some point by bulls.

3. Patience is a virtue when it comes to bears

Because bear markets are temporary, there is no reason to panic by selling all your stocks and putting your money in cash accounts. If you have enough cash to ride out the downturn, it’s best to leave your stocks alone during a bear market. This will prevent you from pulling out the bottom and risk missing the inevitable rebound, Mark Riepe, managing director of the Schwab Center for Financial Research, told CNN Business.

4. The long view is the best view

If you’re investing for a retirement that may not begin for decades, you should develop a long-term strategy that takes market volatility into account. Fidelity Investments recommends choosing a combination of investments based on your time frame, risk tolerance, situation and personal financial goals, and then sticking to this long-term approach. This approach will help you maintain a good mix of assets – such as growth and value stocks, bonds, funds, cash and money market securities – and prevent you from making sudden and unnecessary moves during a bear market.

See: 7 things everyone with a retirement plan should know in a bear market
To find: How to Survive and Thrive in a Bear Market: Experts Share Solid Investing Strategies

5. There are still good stocks to buy

A bear market is no excuse to stop investing in stocks. In fact, it can be a great time to buy – if you pick the right ones. Liz Ann Sonders, chief investment strategist at Charles Schwab, told CNN Business that she recommends focusing on companies with cash-rich and low-leverage balance sheets, and that have positive earnings revisions and low volatility. These types of companies tend to have strong trading fundamentals, which means buying them at depressed prices should pay off later.

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5 Quick Facts Gen Z Need to Know About Bear Markets

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