History repeats itself, even when it comes to exchange traded funds (ETFs). There’s plenty to be learned from this bear market.

The common tendency for most investors is 100% equities, and the potential just isn’t there, as Random Roger’s Roger Nusbaum, points out. He believes that asset allocation is around for this very reason, and he wants investors to learn form this Bear market, so the next time around they are better prepared.

Defensive action is best taken before a 40% drop, not after. Too much invested in risky assets will reveal itself after the emotion kicks in , which is not the place to be. Nusbaum says the idea behind proper asset allocation is that whatever decline occurs it does not trigger a panic point that causes you to deviate too far from the plan you spelled out before anything bad happened.

Sounds simple, yet it is a sentiment that lies in the idea behind moderation when selecting your portfolio components. Our own strategy involves looking for those areas that are moving, then using the 200-day moving average as an entry point. When that fund is 8% off its high or below its 200-day moving average, we sell.

Whatever your strategy is, just be sure to stick to it and keep your emotions out of it.

Times like these always present learning opportunities and a chance to review what you could have done better for the next time.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.