My Playbook for Bear Markets

How to survive the bear market and prepare yourself for the next cycle?

Here we are, the market has recovered. The VIX (Volatility Index) is settling back to normal after a turbulent period marked by sharp rallies and sudden pullbacks, sometimes triggered by nothing more than a single sentence from Donald Trump. Navigating this kind of environment is no easy feat. It is chaotic, reactive, and emotionally exhausting. Less like a rollercoaster... more like a spin cycle in a washing machine.

A few months ago, I published an article on the Do’s and Don’ts of a Bear Market.

Do's and Don'ts in a Bear Market

This piece revisits those ideas through a fresh lens, adapting them to today’s market conditions and aligning them with my current strategy and recent decisions. It is meant to serve as a guide for navigating the next market shock.

Let’s dive in!

Riding the rollercoaster

Let’s be honest, in a perfect world, the best way to handle bear markets would be to know exactly when they begin and end. But market timing is anything but easy, especially when price movements are driven not by company fundamentals or technical patterns, but by a single man's remarks.

While it is nearly impossible to forecast the market bottom, it is possible to identify strong support levels that may offer compelling entry points. But before diving in, one crucial thing is needed: a well-defined strategy.

The strategy

A solid approach to bear markets begins with self-awareness: knowing your goals, risk tolerance, and investment horizon. Without a clear strategy, it is easy to get caught in the emotional swings: buying too early, panic-selling at the bottom, or standing still while opportunities pass by.

Here is how I approach it:

• Start with fundamentals. I identify stocks with strong business models, solid balance sheets, compelling market and long-term potential

• Mark key support levels. For each stock on my watchlist, I define price zones where buying interest has historically emerged. These become my potential entry points. I presented my watchlist and buy zones in this article (and a lot of you liked it a lot)!

• Stagger entries. Rather than going all-in at once, I build positions in stages. This allows flexibility and preserves cash if the market dips further

That’s it. No magic formula. Just a disciplined, patient approach!

Tips and additional guidelines

Alongside my core strategy, there are a few additional principles I stick to:

• Stay cautious on extreme days. During bear markets, I avoid buying on days marked by sharp selloffs or euphoric relief rallies. These are typically driven by emotion, not fundamentals, and tend to reverse quickly. Instead, I prefer negative days with measured volatility, when prices are down, but the market is not in total panic mode

• Maintain balance and diversification. I aim to diversify across stocks, sectors, and geographies to reduce concentration risk. This helps smooth performance and avoids being overly exposed to one theme or region

• Set position limits. For each stock, I define a maximum position size to prevent overweighting potential losers. No matter how promising a company looks, I never let it dominate my portfolio

• Stick to the thesis. My sell discipline is strict, if the original investment thesis no longer holds, I sell, even if the price is attractive or I have to take a loss. Capital preservation is always important

Everything is a matter of probability

Even the best investors make mistakes. But their role is clear: increasing the probability of delivering positive returns. And to do that:

• You follow a plan and avoid listing to your emotions

• You avoid buying at absurd valuation

• You define buying zones on strong supports…

• … and you are patient enough to wait for them

• You buy only the best business models

• You strictly follow some financial metrics like strong balance sheets or increasing net profit margins

And the best part: to do that you don’t need to follow stock prices every day… another great element to improve your mindset!

---

What is your strategy for bear markets? Share your thoughts in the comments

While this newsletter provides valuable content for free subscribers, here is why upgrading to a paid subscription is worth it:

• Access exclusive content. Dive deeper with detailed analyses, advanced insights, and premium research not available to free subscribers

• Follow my portfolio. Gain exclusive access to my portfolio, including monthly updates, tracking my moves, and watchlists

• Discover more stock ideas. Explore in-depth stock ideas, technical analyses, and strategies tailored to uncover hidden opportunities

• Support this newsletter. Your subscription directly supports the creation of high-quality, valuable content to help you achieve your investment goals