A few days ago I wrote about why we need a bear market (anyway even in your 60s you could be investing your surplus) – so we all need a bull market only in our 90s! If at all we withdraw. If my dividends keep rising, I am likely to be an investor in accumulation stage permanently.

However, we do need a bear market, because it has some advantages like…

1. It keeps me humble: we have an investment group where we talk more about our failures (success is well almost banned) and it is during a bear market that we are loudest. So when an oil price hike spooks an Indigo you go back to your basics and ask ‘is this a temporary fall or permanent’. In a bull market introspection is rare – even if you have sold your multi bagger too soon! Hello humility, we need you for success in the markets – as a trader or as an investor.
2. Forecasts become more rational – I am not sure if I want to see a stud going around saying how getting 25% cagr in the markets for 25 years is something that everyone can do. I am not sure I can. Happily I need a much smaller number on my equity portfolio even if I live till the age of 100. However in a bear market (last few years equity returns are in single digits, did you notice that?). Even sip returns are not in the 24% range which is a common promise by equity aficionados!
3. People tone down behavior and expectation: when you hear people talk during a bull run – they think that the market is going up because of them! Now in a subdued environment they are more realistic about what can be achieved.
4. People reconsider their early retirement plans – and plan for less aggressive returns – and also scale down their expenses!
5. People now look at their asset allocation more closely and find that debt is not so bad after all!!
6. The look out for a side job or something else to create a second or third stream of income is implemented in full swing!

Apart from the above the other asset classes – like Real Estate, start ups, etc. start getting valued at much better prices. Suddenly the Value Investor is looked upon as a hero! Arguments about Growth Vs Value gather momentum and the balance favors value. Companies with just ppt (plans) and no excel (results to show) are exposed for what they are worth.

Hey, we do need a bear market.