There’s an old saying that goes: “If you meet a bear in the forest, don’t run. Just play dead.”
As odd as that sounds, it might be the best advice not just for wildlife encounters, but also for the investment when it encounters a bear market.
We all know bear markets can be scary. They are accompanied by lot of noise – Markets are down, portfolios are bleeding, investors lost a few lakh crores. News headlines scream negativity and uncertainty. And worst of all, it feels like you’re losing control.
In these moments, it’s tempting to do something – to sell everything or to chase after the next “safe” asset. But when you are investing for long term, especially during a downturn, doing nothing – “playing dead” – can be the wisest move.
Sometimes, not doing anything is a decision in itself – A decision to stay still.
I remember a quote by Charlie Munger:
“It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.”
Let me share a real-life example of one of the clients (and a good friend) who had invested ₹10 lakhs in a flexi-cap mutual fund. With the downtrend of the market, the value dropped to ₹7 lakhs in 6 months. He was so fearful. He called me up in panic and checked if it was a good idea to sell off and put everything in a safe product where the capital is safe.
Although I tried to convince him to have patience and that things would surely be better, the decision he took was entirely the opposite. He redeemed all his investments when the market was all-time low.
A year later, the market recovered. If he had stayed invested, the market value of the fund that he chose to withdraw would have been worth ₹12 lakhs.
When I say, “playing dead”, I don’t mean ignoring everything. I don’t mean stop reviewing your goals and ignoring your asset allocation.
I meannot panicking, not making emotional decisions, not reacting to every bit of market noise, and trusting the plan you built when you started your financial journey. I also mean staying calm and sticking to your plan.
Think of the long-term investments like a tree. We don’t dig it up every week to check if it’s growing. We water it, let it be, and allow time to do its job. The same is true for wealth creation through equity mutual funds.
Not acting out and being patient works every time. Because bear markets don’t last forever. Historically, they have always ended. And they are usually followed by bull markets that reward those who stay invested.
With my experience of 20 years, I have learned that panic always leads to poor decisions. Selling at a loss and switching to low-return assets often ends up doing more damage than the market downturn itself.
Keep your calm and
✅ Revisit your financial goals – check if your life goals have changed due to some life event
✅ Check if your asset allocation is still aligned. If need be, then rebalance the portfolio after discussing with your advisor
✅ Continue your SIPs — they help you buy more units during bear markets
✅ Keep an emergency fund ready – so you don’t touch your long-term money.
✅ If you have additional funds, make the wise decision of investing in the products that have fallen (this gives an excellent opportunity to earn a greater return when markets move up)
✅ Talk to a financial advisor — someone who can hold your hand and help you answer the many questions and doubts buzzing in your head.
Becoming financially independent in the long term, without the effect of market downtrends, is not easy but is doable. The following approach can prove to be a game-changer in becoming financially independent in the long term.
- Identify your financial goals and the timeline for each goal.
- Match the right mutual fund category with your financial goals. Invest in selected debt funds for short-term goals, hybrid funds for medium-term goals, and equity funds for long-term goals.
- Invest in a combination of various asset classes like equity funds, debt funds, hybrid funds, gold funds, etc.
- Keep thematic funds and sectoral funds outside the core portfolio, so that changes due to any reason in a particular sector do not affect your portfolio.
And remember, when the market roars like a bear – Don’t run! Don’t fight. Stay still! Play dead!
Stick with your plan. Because the ones who survive the bear are often the ones who simply don’t act in panic.
Shreedhara is the Founder & Director of Ara Financial Services Pvt. Ltd. He has an experience of over 2 decades in Financial Service Industry with majority of it in guiding individuals and institutions on their investments requirements.
