9. Do a “debt disaster check” To state the blindingly obvious: debt can be a very useful (but very dangerous) financial tool. That’s true anytime. But during times of rapidly rising interest rates, when the economy is teetering on the edge of recession and the market is increasingly volatile, debt can be a downright disaster. To protect yourself, make it a priority to do a “debt disaster check.” Take a close look at the debt you hold, and assess your ability to service it if rates go up − and keep going up. You’ll want to ensure that even if worst comes to worst − if interest rates double, triple or even quadruple − you’ll still be able to pay at least the interest without downgrading your retirement. For some snowbirds, debt isn’t much of a concern: their mortgage is locked in for several years (or maybe paid off entirely), they purchased their vehicle with cash, they usually pay off their credit cards every month, and so on. For others, who hold mortgages on a principal residence or on a rental property, or have an outstanding loan for their car or their business, or have taken out a home equity line of credit to fund their lifestyle, it’s something to keep an eye on. 10. Quality, quality, quality Remember the old saying about the three most important factors when buying real estate: location, location, location? Well, if you’re a stock investor, the three most important factors to keep in mind when investing during a bear market are: quality, quality, quality. If you haven’t already done so, it makes sense to “tilt” your portfolio to quality names: well-established, blue-chip, dividend-paying companies that are known to have sustainable competitive advantages. If you’re a fixed-income investor, stick to quality issuers such as developed-world governments and investment-grade credits from the corporate world. No, this won’t eliminate all volatility, but it will make your portfolio a lot more resilient to the whipsaw back-and-forth action of most bear markets. This is not to say that you shouldn’t speculate at all. But if you do, do it with your eyes wide open: recognize that in bear markets, speculative, high-risk/high-return opportunities often suffer the most. If you’re a veteran investor with a sizeable portfolio and a strong stomach for risk, then by all means go ahead and speculate. But for most of us, it’s probably best to stick to quality and take a pass on the wild bets until things settle down. 11. Start thinking “opportunity” We’ve said it before and we’ll say it again: behind every bear market there’s a silver lining: the share prices of great businesses often go on sale. If you’re a long-term investor with a bit of tolerance for volatility who can learn to identify these “bargains” (or work with professionals who can), then a bear market can actually be a very good thing. If you haven’t already done so, start getting a watch list of quality opportunities which you’d like to own, should their shares go on sale in the near future. Ask yourself: what part of the market is being sold off indiscriminately? What stocks or sectors have been out of favour during the bear market? What excellent investments can you “stock up on” and then wait to rebound? Truth be told, this type of contrarian thinking − that the time to be thinking opportunity is when everyone else is thinking crisis − has been a feature of most of the successful investment minds in the world. And it should be for yours as well. 12. Feeling stuck? Seek out a professional opinion Anxious about what a declining stock market means for your retirement? Wondering whether you’re pursuing the right financial strategy? Still waking up at night (figuratively or literally) worried about your portfolio? Feeling “stuck” about what to do (or not do) about the bear market? Sounds as if you need to talk to a professional. A qualified, experienced wealth advisor or financial planner can help review your current portfolio and your long-term investment strategy to ensure that you’re on the right track. Perhaps more important, an advisor can function as that calm, objective source of reason during times when market turmoil turns into emotional turmoil. And, when we emerge from the current bear market (as we eventually will), an advisor can ensure that you’re well-positioned to take advantage of emerging opportunities and new trends. All in all, sounds like a pretty good plan. Finance CSANews | SUMMER 2022 | 41
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