A lot of beginner investors in the stock markets across the world have been asking what to do when the markets turn bearish or there is a market correction, and their portfolios are turning red. Usually, people participate in the stock market to make money, and not to lose money. So it gets scary when the markets start losing momentum and all the bullish noise ceases, only for their positions to start printing losses daily.
We have written some articles in the past to guide beginners on how to go about investing in the stock market, which you can explore to deepen your understanding. From How to start investing in the stock market, to what every retail investor should know before buying a stock part 1 and part 2, and Warren Buffett's timeless investment lessons every investor should know. Those articles were written to provide guidance and to serve as reminders to avoid being caught in the FOMO (Fear of missing out) trap, and to avoid making investment decisions solely by euphoria or social media hype. If you had read those articles before dipping your feet into the stock market, then you should be better positioned now.
The stock market has cycles, and it is normal to have bull and bear phases. There are periods when the stock market goes up (bull cycle) and periods when it goes down (bear cycle). As Warren Buffett says, in the short term the market is a voting machine, but in the long term it is a weighing machine, and only fundamentally sound stocks survive that long-term weighing process. The most important thing for you as a retail investor is that overall, over a long period of time, your portfolio should generally be trending upward, even though it would have experienced both cycles along the way.
The Nigerian stock market, in particular, has experienced significant growth over the past few months. It grew by 37% in 2024, 51% in 2025, and 47% in the first half of 2026, after hitting a high of 60.9% in May 2026, essentially surpassing full-year 2025 growth in less than six months. Naturally, that kind of momentum tends to slow down or correct at some point, and that is what began to happen in June.
There have been several postulations regarding the causes of the reversals in the NGX. Some believe it is linked to the private placement and upcoming public offer for the Dangote Refinery, with investors reallocating funds to participate. Pension funds have also been cleared to participate in the public offer, and they played a significant role in pushing the markets up earlier in the year while positioning in equities. Others believe it is a typical pre-election year pattern, while some point to recent structural changes such as the T+1 settlement cycle and its impact on foreign investors, including the resultant pause in the reclassification of Nigeria from Unclassified to Frontier Markets status by FTSE Russell.
Different markets around the world always have their reasons for pulling back. But the more important question for you as a retail investor is, what should you do when it happens?
Sit It Out When Nothing Has Changed
Time in the market is more important than timing the market. The market has a mind of its own, driven by several factors including demand and supply dynamics. Whatever loss your portfolio is reflecting right now is a paper loss, it is unrealized. You only turn it into a real loss when you sell.
If you are an investor and not a trader, then you should learn to do nothing when your investment still aligns with your original thesis and nothing fundamental has changed. At the same time, bear markets are a good moment to quietly revisit that thesis. Ask yourself again why you bought the stock in the first place, and whether anything material has changed in the business, the industry, or the quality of management. There is a difference between patience and neglect, and good investors learn to tell the difference.
As many seasoned investors will tell you, learning to sit and do nothing when the market is swinging is one of the hardest things to do. It is also one of the most rewarding. Stock investing is, to a large extent, a game of temperament more than intellect. Many times, being passive in the market delivers better outcomes than being active and reacting to every market movement. If you have invested in fundamentally sound companies and their recent financials do not give you cause for concern, then it may be wise to simply ride out the volatility.
See the Market as a Discount Window to Buy More Fundamentally sound stocks
For investors, especially long term investors who seek value, market corrections or bearish markets present buying opportunities. It's literally shopping time!
Like we outlined in a previous article, the stock market can be thought of as a large supermarket of businesses. Every day, prices are displayed, sometimes rational, sometimes not. When are you more likely to buy groceries from a supermarket, when prices are elevated or when they are discounted? Naturally, it should be when prices are lower, and that should be your approach to the stock market as an investor.
If you have idle cash and the market is down, it may be a good time to begin accumulating fundamentally sound stocks that have been on your watchlist, now trading at more attractive valuations. This is where the concept of margin of safety becomes practical, not theoretical. At the same time, it helps to be measured in how you deploy capital. Bear markets can stretch longer than expected, and keeping some liquidity allows you to take advantage of further opportunities without feeling pressured or stuck.
Average Down with Conviction
Bear markets also provide the opportunity to average down on positions you already hold. If you previously bought a stock at a higher price, you may be able to buy more at a lower price, thereby reducing your overall average cost.
However, this is not something to do blindly. Averaging down only makes sense if your conviction in the investment remains intact. Your original thesis must still hold, and there should be no material deterioration in the company’s fundamentals. Without that conviction, averaging down can quickly become compounding a mistake rather than improving a position.
Rebalance Your Portfolio
Bear markets present an opportunity to rebalance your portfolio. You have the chance to take a step back and look intently at the stocks you own, to determine whether they are fundamentally sound or simply riding on hype. That clarity allows you to make better decisions about what to let go of and where to reallocate.
In some cases, it may mean disposing of meme stocks and rotating that capital into fundamentally sound stocks trading at a discount. Even if that rotation involves taking a loss, you are repositioning your portfolio into businesses you understand and can hold with conviction. When the market eventually turns, you are likely to be more confident in the portfolio you have built.
In addition, as the market declines, your portfolio does not remain static. Some stocks fall faster, some hold up better, and over time your allocation begins to drift away from what you originally intended.
This is a good moment to review that allocation. You may find that certain positions have become too large relative to your comfort, or that some no longer justify their place in your portfolio based on updated realities.
Rebalancing is not about reacting to price movements, but about realigning your portfolio with your strategy. It may involve trimming exposure in some areas and increasing it in others, particularly where you see stronger fundamentals and better long-term prospects. Done thoughtfully, it helps you stay disciplined and prevents your portfolio from becoming a reflection of market swings rather than your investment decisions.
Use the Silence to Learn and Do More Research
When markets are bullish, there is usually a lot of noise. Social media is filled with stock tips, bold predictions, and rising excitement. But when the market turns bearish, that noise fades, and that is often when real learning can begin.
The stock market is not a casino, and consistent success requires knowledge so that you do not fall prey in the game. This is a good time to read more, study financial statements, and deepen your understanding of how businesses operate and how to value companies and their stocks. Read books about investing, check out relevant blogs about personal finance and investment like Cowryvest, learn how to analyse financial results, listen to relevant podcasts, watch relevant Youtube videos, just make sure you are learning as much as you can to sharpen your investing skills. Go through company results over several years where possible, expand your circle of competence across industries, and build the analytical skills required to make informed decisions.
Use this period to refine your thinking and strengthen your process, so that you would not need to depend on others for stock recommendations and continue to fall for meme stocks. Opportunities will always present themselves in the market, but only prepared investors are able to recognize and act on them effectively.
It may seem like there is so much to learn but every step in the right direction counts. Just start and keep learning. Knowledge compounds.
Stay Disciplined and Avoid Desperation
Bear markets test more than your portfolio, they test your emotions. Fear, regret, and the urge to quickly recover losses can creep in quietly and influence decisions.
One common trap is chasing quick recovery plays or jumping into stocks simply because they are trending or appear to be rebounding. More often than not, that approach leads to more losses. Discipline matters more in these periods than at any other time. Staying within your circle of competence and sticking to your process will serve you better than reacting to every perceived opportunity.
Focus on Improving Your Income Streams
For most retail investors, the stock market is a vehicle for growing and preserving wealth, not necessarily the primary source of income. Your day job or business is what funds your lifestyle and provides the capital you invest.
Bearish periods offer an opportunity to look beyond your portfolio and focus on improving your income streams. This could mean getting better at your current role, exploring additional sources of income, or building new capabilities that increase your earning potential.
The more you are able to earn, the more you are able to invest. And over time, that consistent flow of capital into well-thought-out investments can make a significant difference in your wealth-building journey.
In conclusion, bear markets are not interruptions, they are part of investing. They have a way of revealing your true posture as an investor. Your patience, your discipline, your conviction, and sometimes, your blind spots. It is easy to feel like an investor when prices are rising. It is in declining markets that you find out whether you truly understand what you own and why you own it.
If you stay grounded, keep learning, and continue to act with clarity rather than emotion, you will come out of a bear cycle not just with a better portfolio, but as a better investor. And over time, that is what compounds the most.
DISCLAIMER: All contents on this website are for informational purposes only and should not be taken as any form of investment advice. Do your own research and contact your financial advisor before making any investment decision. All contents may not be reproduced, distributed, or used without prior written permission.
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