A Bear Market Is Coming. Here's What to Expect

With the stock market in the red for the year, this is a good time to explore what to expect in a bear market--and to take steps to prepare. But first, let's be clear about identifying the nature of the current downturn. From May 21, the day the Standard & Poor's 500-stock index peaked, through August 25, when the index bottomed, the stock market dropped 12.4%. That qualifies as a correction, which is defined as a decline of 10% to 20% from a previous high. Since World War II, the market has experienced 20 corrections. As of today, the S&P 500 is 8.9% below its May high.

How should you prepare for the next bear market? If you're going to need the money you have invested in stocks within the next five years, you should move some or all of that money to lower-risk bonds or bond funds. Don't sell all your stocks; most investors, even in retirement, should have at least 50% or 60% of their retirement assets in stocks. It's also still not too late to weed out some of your more speculative holdings--and move the money into safer blue-chip stocks. Funds worth considering: Parnassus Core Equity (symbol PRBLX), Primecap Odyssey Stock (POSKX) and Vanguard Dividend Growth (VDIGX). An even tamer pick is FPA Crescent (FPACX), and a good foreign choice is Oakmark International (OAKIX). All were featured in my story 6 Great Stock Funds for 2015, and the Vanguard and FPA funds are members of the Kiplinger 25.

Source: Jewish World Review

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