How to navigate a bear market by your age

How should you invest in a bear market? Experts say it all depends on what you hope to do with the money — and how long you can afford to wait before you sell.

“Your age does matter when it comes to a bear market,” says Anessa Custovic, Chief Investment Officer and Investment Advisor Representative at Cardinal Retirement Planning, Inc. “But it really comes down to when you plan on spending the money.”

A 20-year-old who plans on buying their first home in their 30s, for example, could use the bear market to their advantage. By investing now and withdrawing the cash a decade later, you might benefit from significant market growth — and if the market is still bearish ten years from now, you can always keep renting.

A 30-year-old who plans on buying their first home in the next few years, however, may want to consider a different investment strategy — or, in some cases, the security that comes with stashing their down payment money in a high-yield savings account or a CD ladder.

What about other long-term financial goals, such as retirement? How can you navigate the bear market to your advantage, whether you’re 20, 30, 40 or 50?

We asked two investment experts to share their advice. Here’s what you need to know.

How to navigate a bear market in your 20s

If you’re putting together an investment portfolio in your 20s, you’re in luck. Buying into a bear market allows you to invest while stock prices are relatively low — and if you buy before the market rebounds, you could get a lot more bang for your buck.

That said, the first rule of investing is not necessarily buy low, sell high. It’s never invest money you can’t afford to lose.

Brendan Halleron, Certified Financial Planner® professional and partner at Affiance Financial, advises young investors to build their emergency funds before they get too excited about buying into a bear market. By setting aside three to six months of expenses in advance, you’ll be less likely to find yourself in a position where you have to sell your investments before they’ve had the chance to grow.

Once you’ve got your emergency cash set aside, you can feel free to take advantage of today’s stock prices. “Assuming you have a cash reserve to turn to for any unexpected expenses,” says Halleron, “a bear market can be a good time to buy stocks.”

How to navigate a bear market in your 30s

Many people in their 30s have decades to go before retirement — which gives them plenty of time to watch their investment portfolios grow in a potential future bull market. That’s why Halleron and Custovic agree that people in their 30s can navigate today’s bear market much like people in their 20s.

“For investors still in their early accumulation years,” says Halleron, “a bear market can be a good time to buy.”

Custovic notes that thirtysomething investors should be prepared to both buy and hold. “You have to make sure you stick with it,” she says, “and that your investments are in a diversified portfolio.”

She suggests focusing on well-established equities, ETFs or mutual funds — and steering clear of riskier investments like cryptocurrency. “Just because you’re young doesn’t mean you should gamble with your retirement fund,” Custovic explains.

How to navigate a bear market in your 40s

Investors in their 40s can still take advantage of the low prices offered in a bear market — especially if you view the current market downturn as an opportunity to buy stocks.

“If you could buy a home you really wanted, knowing that it may be worth more in the future, you would likely do so without hesitation,” Halleron explains. “Why not think a similar way about stocks in a bear market?”

That said, people in their 40s should still follow the first rule of investing — never invest money you can’t afford to lose. With fewer years remaining until retirement, you might want to begin shifting some of your investments towards lower-risk options, even if it means missing out on potential market growth, no matter what your risk tolerance over the long term.

“Once you are in your 40s, you need to start making some more defensive choices,” Custovic advises. “You still want to take advantage of a prolonged bear market and continue to invest in well-diversified equity markets, but you need to be thinking about diversification into other asset classes.” This could mean putting more of your money into fixed-income investments such as certificates of deposit (CDs) and certain types of bonds and annuities. “Try and get more stability into your portfolio.”

How to navigate a bear market in your 50s

“If you are in your 50s and looking to retire in your 60s,” says Custovic, “you definitely want to start positioning more defensively.”

By this point, you’re probably thinking seriously about retirement — and whether you plan on quitting your job as soon as possible or building your career for as long as you can, you’re going to want to make sure your investments will be ready for you whenever you need them.

In some cases, this could mean splitting your investments between fixed-income products and equities. That way, you can sell the fixed-income investments while the market is recovering and give the equities time to grow.

“You might want to consider insurance products or annuities,” Custovic advises. “You’ll have an income floor to draw on once you retire, and you can allow your other investments to recoup the value they lost during the prolonged bear market.” Custovic also suggests using treasury bills to your advantage. “Roll treasury bills forward so any new money is going to stable investments, and draw on those investments when you begin withdrawing money in retirement.”

This income-focused investing strategy can apply whether the market is bearish or bullish. More importantly, it can offer fiftysomething investors peace of mind — even during a prolonged market downturn.

“Rather than worrying about bear market headlines, focus on the activities you can control,” Halleron advises, “such as staying healthy, maintaining employment, spending less than you make, systematically contributing to your investment accounts and rebalancing regularly.”

That way, you’ll be prepared not only for a good retirement, but also a good life — no matter what the market does next.