invesTing in a bear markeT

Should an Amateur Investor Buy into a Bear Market?

For most, investing is more than landing ‘a great deal’

Zoe Landi Fontana, The Weekly Journal

If you’ve ever walked into a store, seen an item on sale, then bought it just because it was offered at a discount… congratulations, that was an impulse buy – a FOMO (fear of missing out) purchase. In a bear market like the one we’re seeing now, an amateur investor might be tempted to impulse buy their way into the stock market. One expert says ‘don’t do it’.

A common phrase in investing circles, “buy the dip” explains this exact phenomenon as it plays out in financial markets. It sounds attractive - buy when markets are low, then when they bounce back up you’ll have a high ROI. Yet, “buying the dip” isn’t a realistic investment strategy for most.

How To Responsibly Invest As A Layperson

“Professional investors – some buy the dip, and some are holding really tight. The non-professional investor does not want to [try and] time the market. Their best investment strategy is to have a set amount to invest every month regardless of how the market is doing,” explained Mara Liz Meinhofer in an interview with THE WEEKLY JOURNAL. Meinhofer is a CPA and Personal Finances Expert at Financial Clarity Academy, the leading online financial academy in Puerto Rico.

The Financial Clarity Academy seeks to increase financial literacy on the island, where it is desperately needed. They focus on providing education around personal finance to average people, so they can achieve financial stability, save more, and start investing smart.

Of investing responsibly, Meinhofer noted, “It is great to try to buy when stocks are low, but there are some steps [people] need to take first.” That first step is to organize your personal finances. Have three to six months of expenses in savings, eliminate any high interest credit card debt, then choose a fixed amount to start contributing into a 401K.

If you’ve got your financial foundation together and more than a few months’ worth of expenses in savings, you might be ready to enter the market. “If you’re young, start investing ASAP. [Young people] have a longer outlook, they can survive the ups and down,” advised Meinhofer, “We tell our students everything happens in cycles. We are in a challenging cycle at the moment, but don’t despair, in history everything eventually bounces back up.”

Financial Wellness In Puerto Rico

Unfortunately, many people won’t have an easy time building a strong financial foundation, which makes it more difficult to save, and almost impossible to responsibly invest.

While the pandemic raged on, it was clear that average people were suffering economically, but a study conducted by The Financial Clarity Academy, revealed just how severe the situation actually was. “We knew they were having a really hard time, but even in the Academy we didn’t know it was this bad. It was – and continues to be worse than – we think it is,” said Meinhofer.

Of the 450 participants surveyed, the 40-49 year old age group was most worried about finances. “They’re right in the middle. They already have financial responsibilities (children, mortgage, car) but they might not necessarily have a positive outlook on increasing their income. Contrary to the younger ones who believe they have time, and have hope,” Meinhofer elaborated. The study, conducted from 2020-2021 during the pandemic, showed that 50% of participants had less than $1,000 in savings. Another 70% did not have the equivalent of three months’ worth of

In fact, expenses in their savings account - the minimum amount to be considered a ‘safety net’. Credit card debt makes up 68% of personal debt on the island, whereas in the U.S. this number sits at 45%. About 95% of Puerto Ricans have some sort of debt, while in the U.S. this number is 74%. Credit card debt makes up 68% of personal debt on the island, whereas in the U.S. this number sits at 45%. “Living paycheck to paycheck, [they have a] cash flow problem. So, they balance their budget using a credit car. Getting a financial education can guide them on how to better manage their cash flow,” explained Meinhofer. Formal financial literacy classes are rare in Puerto Rico, and while Meinhofer admitted that education isn’t the solution to all financial problems, it is one effort that can reach many people and impact them directly and immediately. Currently, Congress is working on legislation to increase financial literacy amongst students and to establish public policy that will provide financial education to workers in Puerto Rico.