Despite a few hiccups now and then, the market has been surging over the last two years. The S&P 500 (SNPINDEX: ^GSPC) is up by nearly 63% since it bottomed out in October 2022 and doesn't appear to be slowing down.
That said, the market can't continue thriving forever. While no one can say exactly when the next downturn will strike, a bear market is certain to arrive eventually.
While that can be stressful for investors, right now is a fantastic time to start preparing while the market is still surging. Everyone's strategy will be different, but there are three simple steps I'm taking right now to ensure my investments are set up for success no matter what happens with the stock market.
Image source: Getty Images.
1. I'm padding my emergency fund
Building an emergency fund may not seem like an investment strategy, but it can help protect your portfolio if stock prices fall.
One of the worst investing moves you can make is withdrawing your money after the market has already fallen. By selling your stocks at prices lower than what you paid for them, you'll end up locking in those losses and potentially losing a lot of money.
However, emergencies will still happen, even if the market's in a rough place. By having at least three to six months' worth of savings stashed in an emergency fund, you can avoid pulling cash from your investment account if you face an unexpected expense.
2. I'm continuing to invest consistently
No matter what the market's doing, it can be tempting to try to invest at just the right time to maximize earnings. If a bear market is on the horizon, it may make sense to hold off on investing until prices fall. While that may sound like a smart strategy, waiting too long to buy could cost you.
Nobody knows how long this bull market might last. The average bull market between 1929 and 2023 has lasted just over 1,000 days, according to data from Bespoke Investment Group, or around two years and nine months. But it's not unheard of for market surges to last far longer than that. The bull market following the Great Recession, for example, lasted nearly 11 years.
If you stop investing now because a bear market may be coming, you could miss out on serious earnings. The market could have many more months or even years of growth ahead, and continuing to invest consistently will help you take full advantage of it.
3. I'm looking for new buying opportunities
Bear markets can be daunting, but they're also incredible buying opportunities since the market is essentially on clearance. Right now, then, can be a smart time to create a list of stocks you're ready to pounce on if their prices drop during the next bear market.
This doesn't necessarily mean you shouldn't buy these stocks now. Again, investing consistently is the key to maximizing your long-term earnings. But bear markets can be a smart time to buy more shares than you generally would during a bull market when prices are higher.
The advantage of looking for these buying opportunities now is that you can research stocks while your head is clearer. It can be stressful trying to decide where to buy while prices are falling, making it more tempting to buy a stock simply because it's more affordable -- even if it isn't a strong investment. When you already have a list of stocks you've researched thoroughly, you can jump on the opportunity immediately.
The market can be unpredictable, and it's unclear when the next bear market will hit. But the more you prepare now, the better off you'll be when it inevitably begins.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
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