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Investing in Bear Markets

The financial meltdown arising from subprime losses may have been the first event in a multi year economy downturn. Property prices are down, foreclosures are up, banks are getting more selective in their loans and stock markets have been on a downward trend.

Is the bear market already upon us? In the near short term, it is highly probable that stock markets are going to continue their downward trend though some bounces will occur when oversold levels are perceived.

Is it time to exit the market and hold cash instead? Cash is king but such downturns are the best investment opportunities for those with spare cash on hand. Pick up stocks with solid fundamentals. During the last downturn, the market darlings were companies with strong balance sheets or a large cash pile to back them up. Blue chips that regularly paid out dividends were also highly preferred because of the stability they accorded. It even spawned unit trusts such as First State Dividend Advantage and SGAM Singapore Dividend Growth.

Pick up stock bargains now. Go contrarian and the rewards will be reap when the economy turns around and fairly valued companies shine through.
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