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A key recommendation is to minimize exposure to borrowed funds. During downturns, forced liquidations happen when collateral values fall below margins. Highly leveraged investors often face wipeouts, especially when the broader economy is also under stress. Guy emphasizes that reducing debt — both personal and institutional — is pivotal to surviving a prolonged bear market.
2. Build Cash Reserves
Having a cushion of cash is crucial to capitalize on lower prices during the downturn. Investors should aim to preserve liquidity so they can buy during significant dips, especially when prices reach bottom levels. This approach involves patience and disciplined saving ahead of the bear market’s timeline.