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I have a friend who's an engineer. As a result, he thinks that he's got everything covered, including his investments. For the most part, he does – so he doesn't often ask for my input.
But there's one area that he hasn't planned for. You guessed it: a bear market.
When the first wave of the coronavirus selling hit, he came to me.
He asked simply, "Should I have a bear market plan?"
I asked him whether he has a plan for retirement; he said he does.
So then I asked, "Well, why wouldn't you have a plan to take care of anything that might get in the way of that retirement?"
"I don't know… because things happen, and I can't stop them."
Bingo – the answer everyone gives.
"Things happen, and I can't stop them…"
But they're wrong.
Having an insurance plan for your portfolio is just as, if not more, important than any protection you'll have.
Many people had to delay retirement after the 2007-2008 crisis. But still, most people try to ride out a bear market. They get nervous about selling too soon or buying too early.
It's not about getting the timing exactly right. It doesn't have to be complicated.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Strikepoint Trader and contributes to Money Morning as the Quant Analysis Specialist.