As I write this, the Kenyan Stock Market is down 25.4%. My Kenyan portfolio is also down 20.6% YTD.
I had anticipated the Kenyan stock market to hit bottom before and after the elections. I had imagined things would get better after the newly elected president was sworn in and the uncertainty of elections in the Kenyan markets behind us.
However, it seems the Kenyan market, like the rest of the world, is yet to start recovering, and new prices from all-time highs are still being recorded.
With the uncertainty that comes with bear markets, keeping your calm and cool as an investor is necessary. Here are some things I have been thinking about during this bear market.
There Are Other Ways To Beat The Market
Passive investing has become so popular nowadays for a good reason. It has been proven that most stock market investors do not beat the market. That’s why the idea of index funds has become so popular nowadays. More money is being put in index funds and ETFs than in individual stocks.
But when you think about it, what does it really take to beat the market? You will realize that we focus solely on the returns we get from the stock market, not other areas.
“You beat the market by growing your wealth faster than it would grow sitting in index funds. For most people, this is extremely easy. It’s only hard once you]re managing large amounts of money.”
The Easiest Way To Beat The Market is To Invest in Yourself
Increasing your income may give you more returns than the stock market. It could also help you increase your savings, as people with higher incomes tend to save more than low-income earners.
That’s why it’s always a no-brainer to invest in yourself.
Nat Eliason writes,
“I haven’t done the precise math on this, but I’d argue that until you are making mid-six figures, it’s probably a better ROI to spend extra cash on increasing the value of your time than on index funds.
That could be skilling up to a more valuable profession, learning a valuable freelancing skill, starting a business, whatever it is; on a 5-10 year timeline, you’ll probably do much better than you would if you put even 20% of an $80K salary into index funds.”
Even as you seek higher returns from your assets, it’s also wise to seek higher returns when you invest in income-producing activities, whether in your work or business.
Bear Markets Present The Best Buying Opportunities
The bad side of the stock market is seeing the gains that your stocks had made all wiped out in a bear market. Or even to see a stock trading way far below the average price you have bought the stock.
Even though you have lost paper wealth, the losses come with an opportunity to buy more valuable stocks at cheap prices.
Even though I do not try to time the market, I am more excited to buy more stocks in the bear market. In fact, I have been saving more and spending more money in the stock market now compared to other periods. Not because I’m not affected by the losses but mainly because I understand that money is made during bear markets, only that we do not understand it at that moment.
Diversification is Important
They say when you hit rock bottom, the only way to go is up. That is true for most things but not for the stock market. Some companies can bottom, and the stock market can crash. So you are never sure of how bad things can get.
However, you can always protect yourself from the noise, the bad, and the ugly side of the stock market and investing in general by sticking to the investing fundamentals like; don’t invest money you cannot afford to lose, diversification, and the like.
Moreover, the most crucial thing all investors should prioritize is to be able to sleep well at night.
This means that regardless of how your portfolio performs, you are still safe and secure financially, and you can keep calm during the bear market.
