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Bull vs. Bear: How to Protect Your Retirement

You’ve probably heard the terms “bull market” and “bear market.” What do these terms mean and how do they affect you and your retirement savings?

When share prices rise for a sustained period of time — usually months or years — we are looking at a bull market. Bull markets are characterized by a 20 percent rise in stock markets, typically following a drop of 20 percent, or what is known as a bear market. A strengthening economy, strong gross domestic product, drop in unemployment, rise in corporate profits and increased investor confidence are all factors that create the ideal scenario for a bull market.

bull market

According to CNBC, we are currently in one of the longest-running bull markets ever. On March 9, 2009, the S&P closed at a bear market low of 676. It is up more than 300 percent since then. For nearly 3,500 days, investors have enjoyed the benefits of a bull market, but when will it end?

Bull markets, driven by optimism and investor confidence, can be difficult to predict as it is tough to know just when market trends might change. While we may not be able to predict exactly when this bull market will end, we do know is that what goes up must eventually come down.

A bull market is a good time to take part in the stock market if you want to gain profits, but a wise investor will also take appropriate steps to protect his or her portfolio in the event of a market downturn.

Here are three strategies you can use to protect your portfolio from crashing in a bear market:

  1. Diversify. A well-diversified portfolio will typically outperform a concentrated one in a market downturn.
  2. Set stop losses. Whether a trailing stop or a hard stop, stop losses can protect your portfolio from rapidly changing markets.
  3. Protect your principal. Similar to bonds, principal-protected investments mean your principal is usually protected if you hold the investment until maturity.

Whether high or low, it’s important that you act now to protect your retirement and investment portfolio. Contact Dewitt & Dunn today for expert help securing your portfolio.


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