The best approach to mitigate or manage a persistent bear market run is to invest in stocks with relatively low volatility and a long history of dividend growth. Most of these stocks are found in defensive sectors, including healthcare, consumer staples, utilities, defense, and some real estate equities. Furthermore, short-term debt securities, cash and money markets, and precious metals offer a stable and less volatile investment alternative for a bear market. A look at a few stocks to consider during a bear run. 

1. CVS Health Corp (CVS: NYSE)

2. Coca-Cola Co (KO: NYSE)

3. General Dynamics Corp (GD: NYSE)

4. Real Income Corp (O: NYSE)

5. T-Mobile US (US:NASDAQ).      

Traditionally whenever the stock market is in a tale spin, the healthcare sector offers a haven for investors. As a defensive healthcare stock, CVS Health possesses a unique profile that makes it outstanding compared to other healthcare stocks. While most recognize it as a retail pharmacy chain, its services go deeper and encompass pharmacy benefit management and health insurance provision. This multi-faceted business model and robust clinical responsibility signify an excellent prospect for long-term growth. 

Coca-Cola Co (KO: NYSE) remains a formidable giant in the defensive consumer discretionary sector. Its blue-chip pedigree, 61 years of dividend growth, and bullishness are unmatched by any other stock in this sector. Aside from being an S&P 500 dividend aristocrat, it is also a vital member of the Dow Jones Industrial Average — this further reinforces its giant blue-chips status. At 9.23%, it is the fourth largest holding for the Berkshire Hathaway equity portfolio. Warren Buffet has been a shareholder since 1988. Its low-beta stock has been instrumental in preventing a downward spiral as the stock market declines. Furthermore, it gained 7.48% in the year-to-date average through July, beating the S&P 500 by about 21%. Despite its drop during the COVID-19 pandemic lockdown, its rebound has been impressive enough to fend off inflationary-induced bear markets.

As the 4th largest defense contractor in the United States, General Dynamics (GD: NYSE) is worth considering as a bear market stock. Its core selling point is its dependable dividends and relatively low volatility. Furthermore, its strong long-term growth potential and high share prices are vital factors. The company’s defensive market characteristics have been well-documented this year. For instance, despite the market decline, the share gained 8.91% in the year-to-date average through July. During the same period, the S&P 500 dropped 13.34%. That is, it beats the S&P 500 by 22.25% points. With over 31 years of consecutive dividend raises and a long-term focus on growth through sales increases and share buy-back, it only makes sense for shareholders to trust this stock during a bear run.

With a massive 10,000 properties, Realty Income (O: NYSE) holds the most extensive net lease portfolio. However, what’s significant about Realty Income is that all its free-standing single-tenant properties are subject to the triple net lease (NNN). A substantial risk at the individual level, considering there’s only one tenant. Nevertheless, the risk potential becomes insignificant when spread over an extensive portfolio. Most rent (up to 80%) comes from retail properties, while the remaining comes from mainly industrial assets and warehouses. Over the years, the company has expanded to include the United Kingdom and Spain while diversifying its portfolio mix. As far as dividend goes, this company is dependable, having maintained an annual raise for 25 consecutive years. This dividend is often collected monthly like a paycheck. This company’s shares don’t go on sale very often, so when you come across it, endeavor to grab it as it’s one of the best REIT stocks for a bear market.

As an average investor, after a few months of bear run, it might be a good idea to offload your equity-heavy portfolio so it doesn’t financially bleed further. The cash or money market is one of the best places to set aside funds from your equity sell-off. Cash accounts (bank or credit union savings accounts) present little to no risk since they’re not tied to the stock market. A money market account offered as a deposit through the bank or mutual funds is also a great holding place. Both provide an avenue to earn interest without worrying about fluctuations and make for flexibility. For instance, once you feel comfortable with the market situation, you can easily pull out the money and reinvest it.

Short-term securities like the U.S. Treasuries or government bonds have an inverse relationship with the market. So during a fall in stock prices, their prices rise. During a bear run, trading strategies among investors shift towards safety, creating a higher volume of the U.S. Treasuries held by investors. This causes a price increase that stabilizes investors’ portfolios. Therefore, investing your trade equity in short-term securities makes sense. However, not all bonds are created equal during a bear run, so avoid high-end corporate bonds and go for short-duration debts.

Unlike currency that can drop in value due to federal government monetary policy like printing more money, precious metals (gold, silver, and many more) retain their inherent value during a bear market since they have a finite supply. They can therefore serve as a hedge against inflation in the market. You can gain exposure to this asset class through physical ownership or invest in an ETF  like iShares Silver Trust ETF (SLV: NYSE Arca) containing these metals.

The term “bear market” commonly refers to the overall negative performance of the S&P 500 — regarded as the benchmark indicator of the entire stock market. Nevertheless, the term can be used for any stock index ( NASDAQ Composite, Dow Jones Industrial Average, FTSE 100 Index, and many more) or individual stocks with a drop of at least 20% from their recent high. For instance, during the dot-com bubble, the NASDAQ fell by over 75% from a high of about 581% and plunged into a bear market.

The stock market can hit a bear run for various reasons — widespread investor speculations, a weak or slowing economy, geopolitical crisis, irresponsible lending, pandemics, war, over-leveraged investing, oil price movements, and many more. For instance, the 2020 bear market resulted from the global COVID-19 pandemics. While the bear market is tricky to anticipate or manage, the tell-tale signs are always there for intelligent investors to discern. It often starts with a regular stock market dip, followed by a correction, then perhaps premature bargain-hunting. When the trend becomes apparent to an average investor, stock prices have already tumbled, making it tricky to manage or mitigate.

Before investing, you need to define the purpose of your investment. A college education? A retirement? And many more. Answering these questions will help you structure your portfolio to match your goal. For instance, the down payments for your dream home, money needed in the short term, and cash you can’t afford to lose are better invested in relatively stable assets like certificates of deposit (CDs), money market funds, and treasuries. A mix of CDs and investment-grade bonds can serve mid-term goals (4-5 years), while the money you don’t need for a long duration (longer than five years ) can be put into volatile assets like stocks.

The bear market presents an excellent opportunity to reassess your portfolio. For instance, if you’re holding a lot of growth or small-to-mid-cap stocks, it might be time to let go of some of them. The reason is that growth or small-to-mid-caps businesses lack the financial muscle to survive a red-hot inflationary induced bear market. Nevertheless, the idea is not to sell off immediately, as a bear run can present viable opportunities for such stocks. So reassess the situation at your discretion. You can increase your bond holdings in the short run since it guarantees stability while keeping an eye on value vs. growth stock for the long run.

For some investors, especially newbies, once a bear run becomes evident, they tend to sell off everything and move all positions to cash. While this is a great way to protect your money, it’s been proven over time to be counterproductive in the long run. This approach makes little difference in a low-inflation or low-interest environment. Considering the bear market’s short-lived nature, you may lose more money as cash during a high but short inflation period. So regardless of how dismal the market may looks, hold on for at least a few months or less.

Additionally, these bonds should have different maturity from short-term to mid-term. That way, you’ll always have bond maturing and providing reinvestment or upkeep money at any time. Your long-term investment should encompass a broad array of domestic stocks. These include big and small stocks, fast-growing and dividend-paying stocks, and international stocks. Furthermore, it should also include REITs and commodities. These stock mixes offer exposure to asset classes moving at different times and speeds.

Investment is a long-term game, so your action during the market decline will largely determine your overall performance over time. The most reasonable approach to a bear run is to wait it out. It can be challenging, with the news headline blaring all day and friends and families selling off. However, your little patience may be rewarded over time. You mustn’t tamper with your investment if you’re in a retirement account like 401(k) or IRA. Else you’ll regret it when the market rebounds.