Finance Lessons from Bear Country - Part One: Building Your Foundation
Through my telephoto lens, I watched as a grizzly bear excavated earth, its enormous paw like the bucket of a backhoe. Chest deep, she could smell a razor clam buried deep in the tidal flats along the coastline of Alaska’s Lake Clark National Park.
My photography group maintained a safe distance, our bear spray easily accessible, and our movements deliberate and coordinated. The bear barely acknowledged our presence. Later that evening as I replayed the day’s adventure in my mind, I noted several parallels between my work as a grizzly guide and a fee-only financial planner. It would become the inspiration for this 3-part series:
The importance of prep work
Navigating bear encounters
Aligning your journey to your goals and values
In many cases, the same principles that keep you safe among bears can also help you protect and grow your wealth. Because, let’s be realistic, bears in the wild and bear markets can be equally nerve-racking. That intense feeling that something is at risk–be it your health or your wealth–never feels good in the moment.
Today, I’m exploring the importance of preparation in wilderness adventures and investing. Ready? Let’s go.
The Bear Facts: Basic Understanding of Market Cycles and Bear Behavior
Market Cycles as Natural Phenomena, Not Catastrophes
Just as bears are a natural part of a healthy wilderness ecosystem, market downturns are a natural part of a functioning economy. As investors, we must recognize that:
Market cycles have occurred throughout history with remarkable regularity - expansion, peak, contraction, and trough are as predictable as the seasons
The average bear market lasts approximately 9-10 months, while the average bull market persists for about 2.7 years
Even during the most severe downturns, markets have always eventually recovered and reached new heights
These cycles serve essential functions: correcting excesses, reallocating capital to more productive uses, and creating buying opportunities for patient investors
Like a predator’s role in maintaining ecological balance, downturns eliminate inefficient companies and strengthen the overall market ecosystem. Without occasional market corrections, we risk dangerous bubbles that lead to far more catastrophic outcomes.
How Capitalism Has Historically Overcome Obstacles
The resilience of capitalism mirrors the adaptability of bears themselves. Both have evolved to overcome seemingly insurmountable challenges:
Despite two World Wars, the Great Depression, the 2008 Financial Crisis, and a global pandemic, American markets have delivered average annual returns of approximately 10% over the past century
Repeated market recoveries and new market highs demonstrate that innovation and growth are fundamental to capitalist economies
The U.S. stock market has weathered 26 bear markets since 1929, with each recovery stronger than the last
Capitalism's ability to harness human ingenuity means that problems often become opportunities - recessions frequently accelerate innovation and efficiency
Just as a bear adapts its foraging behavior to changing food sources, capitalism continuously evolves, finding new paths to growth around, over, under, or through obstacles. This adaptability is not a coincidence but the system's defining feature.
Hollywood portrays bears as villainous monsters, just as financial media portrays bear markets as disasters to be feared. In reality, both are natural forces to be respected rather than feared, understood rather than demonized, and prepared for rather than avoided.
Assembling Your Gear
The first step with any bear adventure is to assemble your gear, and the same is true for investing. Although my bear bag is pretty heavily loaded, there are a few essentials I'd never leave home without:
Bear Spray: Your Emergency Fund
You never want to have to use it, but the reality is that bear spray is a necessary part of backpacking. Bear spray is a quick and effective bear deterrent that can get you out of a tight spot in a jiffy. The investing equivalent of bear spray is, in my opinion, a well-stocked emergency fund. Emergency funds are an essential protection tool, and keeping 6-12 months of cash on hand can help you to navigate tough situations like job layoffs, a bear market in retirement, or a significant and unexpected expense.
The Electric Bear Fence: Bond Portfolio Structure
Just as an electric fence creates a secure perimeter around your campsite, a properly structured bond portfolio provides a defensive barrier for your investments. But not all fences are created equal:
Government bonds, not corporate bonds, have historically offered the best protection
During market turmoil, high-quality government bonds often move in the opposite direction of stocks, providing a counterbalance
The right bond allocation acts as a shock absorber for your portfolio, reducing volatility without sacrificing long-term returns
Like testing your fence before nightfall, regularly review your bond allocation to ensure it's appropriate for your age and risk tolerance
When grizzlies are prowling and markets are growling, the security of a properly constructed defense system can mean the difference between panic and peace of mind.
After setting up camp at Shelter Cove, the three guys began setting up the electric bear fence while the three girls were busy arranging sleeping bags and gear. First, the corner posts were secured deep in the ground; then, the wires were strung taut. Finally, I reached into the bag to grab the battery pack that would fortify our position.
As I lifted it out, I thought to myself, “This is awfully light.” Upon opening the battery pack, we discovered the outfitter had forgotten to supply any batteries. This experience served as a good reminder that a partially executed plan might as well be no plan at all.
Your Map: Creating a Comprehensive Investment Plan
Whether you use a GPS tool or download a map from USGS, having a map is critical when you're in the backcountry. Similarly, a well-designed investment plan serves as your financial roadmap:
Having direction before crisis hits prevents aimless wandering
A written investment plan creates guardrails that prevent emotion-driven decisions
Your plan should include clear triggers for rebalancing, buying opportunities, and taking profits
Like a good map, your plan should account for alternative routes if conditions change
Review and update your plan regularly, just as you'd check your position on a trail
In the wilderness, those without maps often make the fatal mistake of walking in circles. In investing, those without plans and those who don’t stick to their plans frequently buy high and sell low—a financial death spiral.
Building Your Defenses
Traveling in Groups: Diversification Strategy
Bears are less likely to charge a group than a solitary hiker. The same principle applies to your investments:
True diversification goes beyond just owning different stocks
Include asset classes that don't move together—real estate, international markets, etc.
Consider investments that perform well in inflation, deflation, growth, and recession scenarios
Like reaching different waypoints on the trail, spread your investments across various time horizons
Remember: the goal isn't to eliminate risk but to spread it intelligently
Just as I never take clients into grizzly country alone, I never recommend putting all your financial future into a single investment or sector. There's safety in thoughtful diversification.
Knowledge as Power
Bear Behavior Knowledge: Understanding Market Patterns
The most important tool for staying safe among bears isn't physical—it's mental. Understanding bear behavior dramatically reduces your risk. Similarly with markets:
Recognizing market signals versus media noise helps maintain perspective
Historical patterns provide context for current events
Understanding market psychology helps you capitalize on others' fear or greed
Like learning to identify a bluff charge versus a predatory one, knowing different market conditions helps you respond appropriately
Study past market corrections to build confidence in recovery patterns
When I guide clients in grizzly country, we spend significant time learning behavior patterns before we ever hit the trail. The same educational approach applies to investing.
Practicing with Equipment: Becoming Financially Literate
I always ensure my clients practice using bear spray before we venture into grizzly territory. The financial equivalent is developing true literacy about your investments:
Key metrics every investor (or their guide) should understand: P/E ratios, yield curves, inflation indicators
Practice makes perfect: review your portfolio regularly, not just during crises
Simulate your response to market drops: what would you do if your portfolio dropped 20 or 30%?
Resources for ongoing education: quality books, research papers, and reputable financial journals
Consider working with a trusted advisor who emphasizes education, not transactions
The worst time to learn how your equipment works is when a 1,000 pound grizzly is bearing down on you at 30 MPH. The same applies to your financial knowledge—build it systematically during calm periods.
Remember: Preparation is About Confidence, Not Fear
Both in bear country and in investing, the goal of preparation isn't to eliminate all risk—it's to build the confidence needed to make rational decisions under pressure.
When properly prepared, encountering a bear becomes a magnificent wildlife experience rather than a terrifying ordeal. Similarly, market downturns become buying opportunities rather than reasons for panic.
In my next post, I'll explore what to do when you actually encounter the bear—strategies for navigating through market downturns with the same calm, focused approach that serves us well in grizzly encounters.
Until then, happy trails and wise investing!