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The best return in a bear market selloff come from identifying stocks, not sectors, that completely overshoot. This means drawing up a list of potential buys and the prices you consider them to be attractive and wait until they come to you. The bottoms in bear markets are often V’s so you need to pay attention and not get caught up in the sentiment. For all indices note that the stocks that were the darlings of the previous bull market are not the ones that are going to be stellar in the future. The only safe place in a bear market are high dividend payers where the company have strong cash flows. Most people are going to put in the work on stocks, nor do they understand industry dynamics enough. Long term investors should keep putting money in but during the beginning of the decline stick to broad general indices and once these enough carnage boost weightings in high growth indices - Nasdaq and Emerging market because the upside will be greatest. Look at industries that have gotten crucified, like biotech,,and chose a fund that is actively managed as a sophisticated investor constantly upgrade the quality of the portfolio and most honestly, they only need one or two big winners to drive the funds performance. Market cap indices can disappoint if the largest components by market cap are unlikely to be the strongest performers in the future. Companies have life cycles and tech investors are going to see the mega tech companies dragging down tech sector performance in the future.

In any bear market, you need some cash to reduce volatility and to have ready in cash opportunities present themselves. Most investor should diversify and keep putting money in but change where money goes based on performance. Quite honestly, bear markets create changes in direction so investors need to forget about what we’re “good” areas and think about the future!

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