Surviving 26 Bear Markets Without a Loss: His 10 Timeless Rules

In his autobiography, The Soaring Eagle: A Life in Stocks by Roy Neuberger, Father of American Mutual Funds, Neuberger distilled his 68-year career into 10 key principles. I’ve compiled them here for you—though it’s a bit long, it’s worth the read!

1. Know Yourself

After analyzing complex factors, if you can make profitable decisions, you’re suited for the market. Test your temperament:

• Do you have a speculative mindset?
• Does risk make you anxious?

Answer honestly. Stay calm and composed when judging—calmness isn’t slowness. Sometimes you need to act fast. Calmness means prudent decisions based on facts. If you’re well-prepared, acting decisively isn’t an issue.

If you’re wrong, exit quickly. Unlike real estate, stocks allow you to escape instantly. You need energy, quick number skills, and, most importantly, common sense.

Be genuinely interested in what you do. I got into the market not for money but because I wanted to win, not lose.

Success builds on knowledge and experience. Stick to familiar fields for professional investing. If you know little about a company or haven’t analyzed its details, stay away.

I never invested overseas because I don’t understand those markets. My international exposure came through domestic firms like IBM, which earns half its profits abroad.

Before becoming an investor, ensure your physical and mental health are sound. A healthy body underpins wise decisions—don’t underestimate it.

2. Learn from Successful Investors

Even successful investors faced tough times late in the century. I spoke with many, and only a few believed they could still navigate the market in 1996 amid soaring stocks.

Yet their lessons are timeless:

• T. Rowe Price succeeded by focusing on emerging industry growth.
• Ben Graham respected fundamental value.
• Warren Buffett applied Graham’s teachings from Columbia University.
• George Soros used his theories in global finance.
• Jimmy Rogers spotted defense stocks and shared insights with his boss, Soros.

Each found massive success their own way.

3. Beware the “Sheep Market” Mindset

Learn from successful investors, but don’t blindly follow them. Your personality and needs differ. Draw lessons from successes and failures, choosing what fits you and your environment.

Individual investors can swing a stock by 10% in a moment—usually a day, rarely over a week. This isn’t a bull or bear market; I call it a “sheep market”.

Sometimes sheep get slaughtered, sometimes just sheared, and sometimes they escape with their wool. It’s like fashion: a designer creates a trend, imitators copy it, and millions follow—skirts go short, then long.

Don’t underestimate psychology in stocks. Buyers are often more nervous than sellers, and vice versa. Beyond economics and analysis, small things like a headache can lead to a bad trade.

In a sheep market, people guess what the majority will do, believing the crowd will find a winning solution. This is dangerous thinking—it makes you miss opportunities. The majority can become their own victim, dragging each other down.

4. Focus on Long-Term Thinking

Short-term investing often overshadows the importance of long-term strategies. Companies invest heavily in the long term, but if short-term results dominate, it harms their growth and prospects.

Profits should come from long-term investing, effective management, and seizing opportunities. If these are in place, short-term trades won’t take over.

When a hot stock misses a quarterly target, market panic can tank its price.

5. Master Timing

When should you buy stocks? When should you sell and step back?

Timing doesn’t decide everything, but it decides a lot. A good long-term investment can go wrong if bought at the wrong time. Conversely, a speculative stock bought at the right moment can profit. Skilled analysts can succeed against the trend, but it’s easier to go with the flow.

Successful investors often buy heavily in weak markets, getting more shares for less. In strong markets, they sell high, earning big on fewer shares. This principle is simple.

Timing is part intuition, part logic. It requires independent thinking. In economic cycles, uptrends can emerge from downturns, and recessions often start at peaks.

Economist Paul Samuelson said the market “predicted eight of the last three major recessions”—spot on. Intuition is almost as crucial as analytical skill.

Timing is delicate. Shorting at the wrong time (during an uptrend) is costly. Ask those who shorted Lytton, Telecom, Levitz Furniture, or Montgomery Wards—right idea, wrong timing. I knew someone who shorted at the 1929 peak, lost everything, and only recovered in the fall.

Bull markets last longer than bear markets, with slow, uneven growth. Bear markets are shorter but more volatile. Still, markets follow patterns: they rarely rise or fall for more than six months straight.

Some investors panic after a loss report, selling immediately without assessing the situation. Nine times out of ten, those stocks should be bought, not sold.

6. Analyze Companies Thoroughly

Deeply study a company’s management, leadership, performance, and goals—especially its true asset value, including equipment and net asset value per share. This concept was widely valued a century ago but later overlooked.

Dividends matter. A proper payout plan can boost a stock’s price. If a company pays out 90% of profits, beware—it’s a red flag for the next payout. Paying out only 10% is also a warning. Typically, companies distribute 40%-60% of profits. Utility stocks often pay more.

Many institutions downplay dividends, but individual investors rely on them for income growth.

What’s a growth stock? Smart investors spot its potential early. Usually, a company’s brand gains recognition at maturity. Growth is slow, but investors buy because expectations are realistic.

People overfocus on assumed growth, ignoring recessions, wars, government reassessments, or changes in growth metrics.

A stock’s P/E ratio rarely stays around 15x because people overestimate future prospects—often wrongly. Exceptions are rare, with a 1% chance. High P/E ratios tempt investors to overpay.

I’m fine with blue-chip stocks at P/E ratios double the 10-15x range, but many stay at 6-10x, benefiting both sides.

Control a company’s total market value, and you’ll earn more.

7. Don’t Fall in Love

In this adventurous world, people get obsessed with ideas, people, or ideals. Stocks can be the most obsessive of all—but they’re just paper proving ownership, a symbol of money.

8. Diversify, But Avoid Hedging Trades

Hedging means going long on some stocks and short on others.

Professionals use hedging daily to manage risk, but for newcomers, it’s often a gamble. I don’t recommend it, though it’s not illegal.

Hedging revolutionized modern stocks. A century ago, buying the same stock in New York and London yielded small profits from price differences. Experts bought in one market, sold in another—low profit, low risk.

Today’s market is far riskier. If you insist on hedging, diversify, see the big picture, and ensure your strategy is sound. To diversify, maximize income sources like capital.

9. Watch Your Surroundings

By surroundings, I mean market trends and global conditions. Adapt my frameworks to your market’s dynamics.

Focus on percentage changes, not raw numbers, in market evaluations. A 100-point drop sounds big but might be just 2% of an index.

Monitoring markets helps me spot downturns and recoveries, offering chances to invest conservatively in short-term zero-coupon treasuries, long-term bonds, or T-bills.

Short-term zero-coupon treasuries are a safe haven for big investors—safer than any investment, even safer than cash under your pillow. No economist can predict rates better than market trends. Low long-term rates signal economic trouble more than anything else. Rising short- and long-term rates tell investors: an uptrend is coming.

Stocks aren’t seasonal—investing by the calendar isn’t necessary. For investors, every moment carries risk. For those who enjoy life and investing, opportunities are always there, no matter the season.

10. Don’t Stick to Old Rules

Adapting to changing conditions is essential. My view: actively adjust to economic and political shifts. Technologically, some things we can control, others we can’t.

I excel at bearish thinking, often countering optimists. But if most are pessimistic, I go bullish—and vice versa—while hedging.