Investing in a bear market is a difficult task, and the longer a bear market continues, the more widespread is its destructive effect. It can and will wipe out years of gains in no time and leave portfolios decimated, which can take 10 years or more of a bull market to restore. Safe investments in such periods are a difficult to find, even as investors become risk-averse and the value placed on all future production is very low. And yet, economic activity does not cease entirely - it simply contracts, and periods of low speculation result in substantial investments in areas that offer the most productive growth prospects. Some of the best known companies are formed at the bottom of bear markets when pessimism about the future reigns supreme.

The good news with bear markets is that they typically run for a much shorter duration than bull markets, of course the bad news is that they do their damage rather swiftly, giving very little time to fully react. Safe investments during such markets typically are:

1. Cash - Obviously your savings and checking account are rising in value relative to stock prices, such that, at the bottom, you can get more for your money.
2. Short-term treasuries - One of the safest cash equivalents, though likely to carry a rather low rate of interest. But if you are concerned about the return of your capital rather than on your capital, this is a safe and liquid market.
3. Intermediate-term bonds - Typically, the Federal Reserve (or your central bank), will lower interest rates to help stimulate the economy, causing bond prices to rise. However, in a broad based bear market, including one based on financial credit freeze, intermediate-term to long bonds will also lose value as investors question the long term viability of the issuer of the debt.
4. Bonds from stable governments with strong balance sheet across the world - Clearly, a bear market is not the time to be investing in areas of the world where stability is in question, in spite of attractive interest rates on government debt from those countries. It is best to look for sovereign debt from countries that are in great shape during good times, so that they can take a hit during bad times and still come out in good shape. One of the reasons to look for such sovereign debt is to protect the value of your investment from currency devaluations.

Short-term bear markets tend to usually provide you with an escape route by creating a bull market in some investment or the other - whether they be bonds, real-estate, select commodities, precious metals and so forth. Broad based bear markets decimate everything, even sometimes destroying currencies as governments try to inflate their way out of trouble. In such scenarios, finding an alternate store of value - such as stable currencies worldwide, and holding onto some gold/silver, is valuable. In other words, keep the gunpowder dry for that inevitable bottom and upturn, which can lead to fortunes.