Surviving a panic

Making good decisions in the panic stage of a bear market

Bear markets typically have three components, the first is a shock that triggers the initial fall, the second is where pre-bear market overvaluations are corrected and a final panic stage where fear reigns supreme.

Surviving that panic stage of the bear market is not easy.

Using scenarios to manage uncertainty

During severe bear markets, uncertainty goes through the roof making assessments about valuations more challenging.

We use a scenario based approach to help provide clarity at times when uncertainty can seem overwhelming.

Why we buy slowly during the panic phase when markets appear very cheap

  • Markets overshoot. Prices can fall from overpriced to fairly priced to cheap and sometimes to very cheap. Dollar cost averaging often gets a lower entry price during a panic
  • Fundamentals change. Sometimes markets that appear to be very cheap turn out to be not so cheap as more information emerges. Moving slowly allows us to re-assess valuations and change course if necessary
  • We are all human. Moving slowly helps manage emotions and make it more likely that sensible buying actually gets done

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