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Today, we have a rare opportunity to invest in a bear market.
And while you might be gun shy about the very idea, I’m here to tell you that you should ALWAYS invest during bear markets.
I first heard this statement uttered by my business school professor years ago, and it has consistently led to some of my most profitable returns.
In fact, you might even say that the phrase “bear market” could be another way of saying, “a period of time when you should be a buyer.”
But before I reveal this bear market opportunity, I want to clarify WHY you should seek out bear markets for your investment capital.
History has shown that the greatest investment opportunities occur during bear markets.
Think about that for a second – it probably runs counter to how you’ve invested in the past. Most investors sell during bear markets and buy during bull markets.
That’s because, unfortunately, most investors aren’t capable of dealing with the emotional rollercoaster that a bear market brings. Bear markets, particularly the bottoms, are extremely volatile….and very few investors have the patience, conviction and fortitude to persevere through volatility.
Most investors prefer to stick with the herd buying into the latest bubble. And statistics don’t lie. Those same investors are the ones that always get caught when the bubble pops. Tech investors, real estate, and gold investors come to mind.
In contrast, the few traders that can survive the volatility of bear market bottoms become the wealthy investors of tomorrow. Just ask Warren Buffet, George Soros, Carl Icahn, James Rogers, etc.
Warren Buffet said it best, “Be fearful when others are greedy and greedy when others are fearful”.
His philosophy is timelessly profound and can be applied in any market. Because during times of heightened fear the best bargains can be found. This is where the seeds are planted.
Investors follow Buffet’s lead every year when they buy the worst performing stocks of the Dow, otherwise known as the Dogs of the Dow. In fact our own Ian Wyatt just suggested to buy the worst performing stocks in the S&P 500 because he truly believes in Buffet’s philosophy and the strategy has outperformed the market over the long-term.
The question is do YOU have the stomach to invest in a bear market?
If so, I would like to introduce you to one of the best opportunities in years:
The above chart displays one of the most extreme bear markets in over 30 years. Yes, we all know the story of gold and its monumental demise, but the Junior Gold Miners have been hit the hardest having lost 80% over the past few years…and creating a truly rare investment opportunity.
There are several ways to attack the bear market in the junior miners. First you could just buy the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ). It’s the easiest way to gain exposure to the sector, but there will an opportunity cost associated with the move unless you time things perfectly which rarely happens in the world of investing.
Or you could use the strategy I use within my High Yield Trader portfolio…sell puts.
Through selling puts you are able to collect income while setting the price you would like to buy shares.
I’ve been doing this since May of last year in GDX and have made a staggering 34.2% in locked-in income while the underlying ETF has lost 20.8%. And the best part about it is that I haven’t even had to buy any shares of the ETF.
It’s a simple and powerful strategy that is extremely powerful in bear markets. Because when fears rises, the prices of options rise and we are able to sell puts for significantly high prices.
Basically, we are able to sell puts every month and collect 5-10% on our capital until the underlying moves below the price we are willing to buy the ETF. Once we have the position we take on the buy and hold mentality and wait for the profits to appear.
You can learn more about the strategy and how I use it within my High Yield Trader portfolio here.
But in any event, right now is the perfect time to wade into the gold sector – it’s a low risk, high probability trade that doesn’t come around often.