IMPORTANT NOTICE: This article does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up and you may lose all of your capital. It’s important to consult a professional advisor before making any capital allocation decisions.

  • Investing in bear markets can be stressful, but trying to time markets is very difficult in practice
  • This is why it is so important to stick to a disciplined investment approach to continue earning income even during bear markets
  • A dollar cost averaging strategy can help avoid the common mistake of attempting to time market entry points
  • Locking your assets can also help avoid emotional selling and maintain a focus on the long term
  • Yield App customers can earn 12% p.a. on YLD locked on the platform

One of the most crucial pieces of investment advice shared by those with years of experience is simple: trying to time the market is a mistake, because it’s very difficult to get it right. Instead, employing a long-term approach to preserving and growing one’s wealth tends to pay off over the years. As the old adage goes, “it’s time in the market, not timing the market”. This long-term mindset is particularly important during bear markets and times of market stress, when there can be a greater temptation to trade instead of holding assets for the long term. 

It’s time in the market, not timing the market

In fact, history shows that timing the market with any amount of consistency is very difficult, because market movements can be hard to predict. Even the most experienced investors struggle to get it right all the time. Research shows that most of the time, the cost of waiting for the perfect market entry point is greater than the benefit of market timing, even if this is executed perfectly.

In addition, such a strategy requires a lot of research and technical knowledge, which most of us don’t have time for. Another reason why it is difficult to generate strong gains when trying to time the market is that it tends to incur high trading costs, which erode returns. This is just as true for digital assets as it is for traditional markets, if not more so, since trading costs (gas fees) are often significant.

And finally, it is difficult to eliminate human emotion from decisions that involve the risk of monetary loss. As such, often people panic and sell assets at the most inopportune time – during bear markets when selling means crystallizing the loss. Conversely, it is natural for us to buy assets that have already gone up in value, because it seems like they will continue to do so. These are just two examples of how emotions get in the way of investment strategies, and this is why having a strong discipline while investing is so important.

READ: How to overcome emotional investing

Dollar cost averaging

There are several strategies that can help to avoid these mistakes and continue earning passive income, even during bear markets. One of these strategies is the dollar cost averaging strategy, which is the practice of systematically allocating equal amounts of money spaced out over equal time periods: for example, once a month or once a week. 

Employing a dollar cost averaging strategy tends to result in better returns over time than attempting to time the market or investing a lump sum. This is because the investments are spread out over equal intervals, allowing an investor to take advantage of the lows as well as the highs. In comparison, with a lump sum investment, it is difficult to know at which point in the market cycle you are investing, while timing the market is a risky and unreliable strategy.

READ: What is dollar cost averaging and why does it matter?

In addition, dollar cost averaging takes the emotion out of investing, ensuring you stick to your discipline and avoid any rash decisions, especially during volatile market conditions. This is extremely important, since selling during a bear market can have an adverse impact on one’s wealth should there be a recovery or when markets return to their norm.

Long-term focus

In general, when it comes to growing one’s wealth, focusing on the long term and avoiding short-term market noise has often proved a far more reliable strategy than attempting to execute short-term trades. This is especially true for investors with little experience and not a lot of free time to watch the markets. 

However, it can be difficult to focus on the long term when the markets are all in the red, and the temptation to sell can be strong. Another way to avoid this is by locking away assets for a period of time, which takes away your ability to access them during times of market stress. It may seem frightening to have one’s capital locked away, but in the long-term this strategy could help you avoid trading mistakes during bear markets.

READ: How to earn inflation-beating interest in a bear market

In the world of digital assets, it is common to find opportunities to lock away your assets for passive income. For example, Yield App has introduced the option to lock up your YLD tokens for 12 months for higher rewards. The annual interest on locked YLD is 12% for Silver Tier members and above. 



Apart from removing the temptation to exit, locked up assets also usually earn higher annual rewards than assets that can be redeemed at any time. For example, the maximum reward for staking YLD on Yield App is 6% p.a. (for Diamond Tier members), meaning locking rewards are double those available for staking. This is often the case when it comes to locking your assets, so this option is often worth considering, especially during bear markets, when strong income is hard to come by.

READ: How stablecoins can help you increase yield in a bear market

The bottom line

Investing during bear markets can be stressful and it is easy to make mistakes. Having a strategy at hand, such as the dollar cost averaging strategy or the ability to lock your assets for passive income over a period of time, can greatly reduce the chance of making a mistake and diminishing your wealth. 

When markets are down, sometimes the best option is to relax and do nothing. Practice shows that global markets typically recover after periods of stress, so it is usually prudent to wait for this to happen. Investing is a long-term game, and no one should ever invest any assets they cannot afford to lose or cannot do without in the short term. Following these rules can help build a successful long-term strategy, ensuring your wealth keeps growing, regardless of market conditions.

Do you want to earn the market’s leading rates on your digital assets? Sign up for a Yield App account today!