It makes sense, for the reasons outlined earlier, to avoid sectors and companies that are more highly rated in a bear market. In short be wary of:
The stricture against avoiding companies on high price earnings ratios does not mean that it's okay to buy shares with low price-earnings ratios indiscriminately. As already noted, low price-earnings may simply reflect a widespread expectation that a company's earnings are about to drop sharply.
There are a number of sectors which historical precedent suggests you should be wary of in any sustained market downturn even if their ratings are fairly modest. These are:
The other point to reiterate is that smaller companies tend to do worse in a bear market than large companies, unless they are particularly cheap on fundamentals at the outset and are in areas of the market that are generally recognised to be defensive.
To sum up, staying invested in stocks and outperforming is about assessing critically and dispassionately every stock you currently own and deciding how well or otherwise it will hold up in more testing times. Don't be tempted into holding stocks that might be vulnerable simply because they have served you well in the past.
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