The Painful Lesson From My First Bear Market

Doc's note: I've seen some scary days on Wall Street, like the 1987 "Black Monday" stock crash and the May 2010 "flash crash." If you're in the market long enough, you'll see your share of crashes...

Marc Chaikin is also no stranger to bear markets. With more than 50 years on Wall Street, Marc has seen his fair shares of ups and downs. And today, he explains the valuable – and painful – lesson his first bear market taught him...

When I started on Wall Street, we hadn't yet landed on the moon...

That was a long time ago. And I've learned a lot along the way. But the most important lesson I ever learned happened early on in my decadeslong career.

You see, I joined Shearson, Hammill in 1966...

I started learning the ropes as a broker at the Wall Street firm. I wasn't an analyst yet, but I spent as much time as I could with those folks.

As an up-and-comer with a mind for finance, the stock market was the most interesting thing in the world to me. I wanted to understand everything about how it worked.

More important, I wanted to know how to use the stock market to make money. And frankly, I picked the right time to get into the business...

I earned my license on October 7, 1966 – the exact day the bear market ended. For the first two and a half years of my career, it felt like every day was an "up day."

Life was good back then. I was 23 years old, bringing on new clients, and making great returns for them as a broker. It felt like I had life – and the markets – all figured out.

Everything went great until early 1969...

That's when the first bear market of my career reared its ugly head. It lasted nearly two years... The benchmark S&P 500 Index plunged roughly 35% over that span.

It was brutal. Instead of every day being an "up day"... they were almost all "down days."

As tough as that time was, though, it quickly taught me the most pivotal lesson of my career... I wouldn't be able to survive in this business without "something else."

I just wasn't sure what that "something else" was yet.

You see, until then, I had focused on "fundamental analysis." It's what every investor used in those days.

Analysts and brokers spent their days diving into the ins and outs of companies. We came up with estimations of future business prospects and earnings... Then, we would decide if a company was cheap or expensive compared with those future prospects.

It all made sense to me at first. And as I said, it worked extremely well for the first few years... It was a bull market, after all.

But when that bear market hit, I realized I wouldn't be able to protect my clients, stay sane, or even go to sleep at night without that "something else." I needed to find something to supplement the fundamental research that my firm was doing.

That "something else" turned out to be technical analysis. It's incredible how much you can learn by taking a little time to study charts and track trends in the markets.

Even to this day, some people still think of technical analysis as some sort of "voodoo." But deep number analysis is what shaped my investment philosophy over the years...

It's also how I built the "Power Gauge." The Power Gauge is a set of tools for individual investors that are specifically designed to turn trading and investing into a fair fight, for those who aren't Wall Street elites.

It's not voodoo at all. Instead, it's an objective way to look at any stock you would like. And most important, it's how you can quickly learn if it's time to invest... or time to walk away.

That's what I needed when my first bear market came around. And it's what I believe every individual investor needs right now.

Good investing,

Marc Chaikin

Editor's note: Right now, Marc is sharing the biggest prediction of his 50-year Wall Street career... a massive and surprising new transition that could determine the next group of millionaires in America. According to Marc, "It'll change the way you eat, shop, work, and more – a once-in-a-generation investment opportunity." Click here to learn more.