If you own stocks right now, you’re in a world of pain. Every sector seems to be declining. Nothing is “safe.”

But we’ve been through this before- as recently as 2000 to 2003. In the last five years, we have forgotten what it’s like to see a severe market sell-off.

This Bear Market started in 2000. The years from 2003 to 2007 were a bear market rally and not the start of a new bull. Why do I believe this? Because no bear market which follows an 18-year bull market lasts just 3 years.

After the go-go 1920s, the bear market after the Great Depression lasted for 21 years.

It’s likely, given history, that this bear market will last at least 11 years and as long as 21 years. If it’s only 11 years- then we will start to see a turnaround in 2011. But who knows for sure? You have to invest for today.

All it takes is a glance at the NASDAQ to know what I mean. It once traded just above 5000. It’s now trading at 2200.

But that doesn’t mean money can’t be made. You can learn to use the Bear Market to your advantage.

How Do You Invest in a Bear Market?

1. Dollar cost averaging

Dollar cost averaging is your friend. That’s where you keep investing a certain amount every month for years. It means you’ll buy some shares at high prices and others at low. It adds up to more shares and can supercharge your portfolio.

Of course, that is only if you buy companies that will rebound out of a bear market.

2. Dividends are a Powerful Force

Also, dividend paying stocks are a good bet (for the same reason as dollar cost averaging.) If you re-invest the dividends, it buys more shares when the stock is beaten up so when it recovers, you’ll see bigger gains. It also employs the magic of compounding.

In Jeremy’s Siegel’s book, The Future for Investors, he outlines why dividend paying stocks are so effective in times of bearishness.

During the super bear market from 1929 to 1954, where it took the Dow Jones Industrial Average 25 years to break even, you would have made out pretty decently if you had bought dividend paying stocks and reinvested.

$1,000 invested in the Dow in 1929 would have been $1,000 in 1954- with no dividends.

But with dividends reinvested, you would have had a 6% annual return worth $4,440 in 1954.

Not too shabby for the most horrible time period in American investing.

Bear Market investing doesn’t have to be complete doom and gloom. You just have to know how to play it.

Peter Lynch, the former superstar manager of Fidelity’s Magellan Fund, has written two of the best investment books out there: One Up on Wall Street and Beating the Street.

In Beating the Street, he tells stories of his hit and miss investments and gives a number of investing tips called “Peter’s Principles.” Principle #14 is: “If you like the store, chances are you’ll love the stock.”

What he is saying is simply: Buy what you know.

How many people living in Atlanta in 1985, shopped at Home Depot, and loved the store? But how many bought the stock? Ditto for Wal-Mart or Cheesecake Factory or, heck, even Applebees (in its early days.)

It is us, the consumer, who really know the superstar stocks long before they’re superstars. Are your kids begging to shop there? Is it the only coffee your college daughter will drink? Does your husband drive 50 miles just to get a cheeseburger there?

These are all signs.

Who wouldn’t be investing in Culvers if they could right now? (It is still private.) Or Potbelly’s? (also private.)

Open Your Cupboards

“How do I invest in tampons?”

Don’t laugh. A reader actually asked me this question. But it makes some sense, right? Tampons are a product that women use the world over. They use them for 30 to 40 years nearly every month. And it’s a product you would think is not going to go out of business any time soon.

Buy what you know.

There are several companies that make tampons- the most famous of which is Tampex. Tampex, the first modern day tampon, was created in the United States in 1936. The brand is now owned by Proctor & Gamble (ticker PG).

One of its main competitors is Playtex, which has just been acquired by Energizer (ticker ENR.) Another popular brand is o.b. which is owned by Johnson & Johnson (JNJ).

All three companies are making money off of this product and have been for decades. It doesn’t get much better than that.

Look around you. What products do you use? Who makes the latest hot anti-wrinkle cream? What is the latest best selling wine? Who makes it?

This investing technique can really work if you trust your instincts. That is the key. If you’re using the product or shopping at the store and dozens of your friends are too, open up your eyes.

How many years have you been shopping at Costco? Do you own it?

Now is the time to start.