Where do investors tend to put their money in a bear market?

Investing, Asset Allocation
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December 2016
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Many retail investors will actually stay put because they have been told "you can't time the market."  Many will finally say Uncle when they reach their pain threshold. Every bear market is slightly different. In 2008, the place to be was treasury bonds, gold, cash, and shorts using inverse exchange traded funds (ETFs) betting the market will go down.

But if you rely on some type of technical indicators, cash is the most conservative, simply covering up until the dust settles. Investment grade bonds and treasuries historically have been a safe haven. But with interest rates likely on the rise, it won't be so certain this time and the bubble may actually be in bonds. They are currently already off between -5% to -7% depending upon the bond sector. But using short selling ETFs are a simple, elegant way to either make money or simply hedge your long positions you don't want to sell. This can also be owned inside an IRA or retirement account whereas shorting individual stocks cannot. You also don't have to worry about margin interest or margin calls.

I personally will use a combination of cash, short term bonds, and short selling ETFs. I will also consider gold depending upon how it is acting at the time.

Hope this helps. Happy Holidays, Dan Stewart CFA®

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