Your Bear Market Survival Guide

Whenever the stock market dips, no matter what the reason, everyone always trots out the same advice.

“Don’t panic.”

“Buy the dip.”

“Stick to your plan.”

“Don’t try and time the bottom.”

These are fine pieces of wisdom, but unless you’re a brand new investor they’ve basically become cliche at this point. Everybody knows that the chaos will eventually end and the world will return to normal. That’s little relief when the rest of the world is melting down and Twitter is filled with gifs that proclaim we’re never going to financially recover from this.

The fact is there are plenty of things you can do during a market downturn that are more productive than doomscrolling, refreshing the ol’ brokerage balance, or listening to the same old pieces of advice.

Let’s take a look at a few of the more productive ones, things that go a lot further than “buy the dip.”

Get your personal finances in order

You can’t buy the dip without capital, and most people get investment assets from their savings. You’ve gotta save — or convince great-aunt Hortense to take the ol’ dirt nap at just the right moment.

This is a terrific time to get your personal finances in order. Cancel those subscriptions you’ve been meaning to punt for months now. Eat more at home, and use my grocery buying guide to save even more money. Cut back on vacations or, if that’s unpalatable, pick a cheaper destination this year. Asia is super cheap once you get there, for instance. So is Eastern Europe.

It’s a great time to also do a little something I call auditing your finances. Basically, you take a look at your recurring bills and take steps to minimize them. You might not be able to do much about your electric or property tax bills, but you can certainly shop your car/home insurance or downgrade your cell phone package.

This reminded me to take a look at my mobile plan, and I just saved $9 per month. I spent less than 5 minutes on this. I cut back from 68GB of data to 20GB, which is perfectly acceptable when you use about 4GB of data per month.

That’s an extra $108 per year in my pocket. It’s not much, but every bit helps.

You’ll also want to take steps to secure your job, since market declines and job cuts tend to go hand in hand. A few weeks of hard work won’t save someone if their performance over the last three years stunk, but it could help someone on the bubble.

(Aside: my best piece of unconventional career advice is to simply be likeable. I’ve lost track of how many people I know who consistently land on their feet because they’re a pleasure to be around. Combine it with competency and you’ll be unstoppable)

Start readin’ kids

Once your personal finances are in order and you’re maximizing your savings rate, what’s next?

It’s time to prepare yourself for success. 

I spend a ton of time following the top Canadian dividend stocks. I’m spending multiple hours each day reading annual reports, listening to earnings calls, talking to other smart investors, and generally immersing myself in the markets.

I’ve been a hardcore Canadian dividend investor for pretty much a decade now. I can look back in my brokerage statement and remember the first time I bought names like Bank of Nova Scotia, Great-West Lifeco, Rogers Sugar, and Fortis. These are names I’ve held for years, and I’ve followed them consistently ever since I bought them.

Unfortunately, most people don’t have my commitment. They’re too busy living their lives. Things like careers, children, and other responsibilities get in the way. So they just don’t have time to follow things closely. And hey, I get that. I have a golf addiction that I just barely keep under control.

So, allow me to propose a couple of compromises. During bull markets, feel free to slack off on the reading a little bit. It’s not as important to follow companies closely when things are going well.

Now that stocks are cheap — and getting seemingly cheaper every day — it’s time to ramp up the reading. Research is doubly important during a bear market because you’re not going to time the bottom perfectly. You’re likely going to be too early. And if you’re too early, you need to know what you own — and that can only be accomplished by learning about something when you’re calm.

The whole point of this is to avoid selling at the wrong time. Say you buy a stock today that’s already down 20%, and it falls another 20% in the next six months. If you’ve researched that stock and have concluded the long-term potential is still there, holding is easy. You might even add more. If you’re buying it based on a tip from a friend or on the advice of some internet weirdo (that’s me! 👋) then you’re far more likely to sell at the wrong time.

The other compromise on this is to outsource your research to the fine folks here at Canadian Dividend Investing. We follow the market so you don’t have to. More on that later.

Zoom out

When you’re researching, it’s too easy to put too much emphasis on the short-term.

Let’s use Canada’s banks as an example. These are wonderful companies with a few different competitive advantages versus banks in other countries. They enjoy a stringent regulatory environment, insure their riskiest mortgages against default (with the government acting as a counter party), and collectively dominate the market.

They have a wonderful record of growing both revenue and earnings over the long-term, which translates into impressive dividend growth. Especially when measured over decades. There are thousands of Canadian investors who rode consistent investments in Canadian banks all the way to millionaire status, and I’m confident an investor who does the same today would achieve a similar result.

Compare that to a short-term outlook. In the next few months as tariffs impact the Canadian economy, folks are likely to lose their jobs. Many businesses won’t be able to survive. And the rest of us will tighten our belts, pay down debt, and increase our savings.

That’s not a great outcome for Canadian banks. Defaults will increase. People will struggle to pay the mortgage and many will default on credit card payments. That’s always the first thing cut when things get dire. Auto financing could easily grind to a halt as folks just don’t bother buying cars that are suddenly 25% more expensive than a few months ago.

The short-term looks pretty crummy, but the long-term story is still intact. Canada’s economy will recover, and our banks are conservatively financed. They’re prepared to survive most anything. If an investor just focuses on the short-term, they’re going to miss what will look like glorious buying opportunities a few years from now.

Here’s what I do — I zoom out. I’m much more interested in what a company has done over the last ten years than I am about anyone’s best guess about the next 6-12 months. I’m mostly interested in top and bottom line growth, giving bonus points to a company that has increased its dividends on a steady basis. I’m also a fan of consistent share buybacks.

A company that has a enviable record of growing over the long-term has already survived bear markets in 2001-02, 2008-09, 2020, and 2022. I like their chances of surviving 2025, too.

The bottom line

Today is a wonderful opportunity to buy future income at a discount. 

The only problem? It gets more and more difficult to trust the process as stocks get cheaper. Especially after a sell-off that lasts for months.

I’m not sure many investors are equipped to handle a market that grinds slowly lower over 6-12 months. Collectively we’re too used to stocks bouncing back quickly.

But there are moves that you can make today that will maximize your odds of successfully investing through this bear market — no matter how long it lasts. You can take care of your personal finances, research new/existing holdings to gain further conviction, and make sure you discount the short-term.

The important part is to actually invest during a downturn. Deploy some of your cash reserves. Reinvest your dividends. Save extra money to put in the market. And, if things get much cheaper, consider using some borrowed money to further take advantage of the situation.

One more thing

We have a very special week planned for the premium version of the Canadian Dividend Investing Newsletter!

Not only will we be doing our regularly scheduled Tuesday deep dive (this week’s edition is on Freehold Royalties) and our Friday quick look at 4-6 different stocks, but we’ll also be taking a closer look at opportunities in the U.S. market. Quick pitches on 10 different American-traded stocks that are interesting amid all the chaos, including a few names that are located outside the U.S.

This special report will be sent out to all premium subscribers on Wednesday. You’re not going to want to miss this one.

Just $200 per year to get Canada’s best dividend analyst in your corner. Upgrade your subscription today to make sure you don’t miss it!