Here’s the best tip for surviving a bear attack: play dead. It will be good practice for when you’re actually dead a few seconds later.
OK, maybe we aren’t talking about this kind of bear attack, but seriously…get some mace!
We mean the kind of attack that happens when the stock market is down. The important thing when it comes to anything bear-related is not to panic.
So, what is a bear market?
A bear market is a period when stock prices consistently fall, often by 20% or more, from recent highs. It’s really that simple.
During a bear market, investor confidence drops sharply, leading many to pull out of the market in fear of deeper losses. This widespread selling can accelerate the decline, creating a cycle of uncertainty and pessimism. It’s a phase where caution typically outweighs risk-taking, and panic can often overshadow strategy.
Bear markets aren’t a reason to panic—they’re actually full of opportunity. With prices falling, it can be a great time to buy quality stocks at a discount and position yourself for future gains.
As the famous investor Peter Lynch once said,
You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.
So, if you’re unsure of what is a bull vs. bear market, this article will help clear up the difference. Are we currently in a bear market? Maybe, maybe not—but we’re certainly not in a bull market.
I know many of you are logging into
But here’s the thing: we’re all in the same boat, so don’t panic. This isn’t the Titanic. The market will correct itself, but it won’t happen overnight.
This is why we preach buy and hold. Even if that number is down, it’s still better than having that money sitting in a savings account with a low interest rate. And remember, investing is only one piece of your overall financial picture.
Instead of stressing over your investments, focus on what you can control—your everyday finances. Pay down debt, cut unnecessary spending, or take on a side hustle to boost your income.
If you really need to do something with your investments, then buy. Remember, this is when smart investors take advantage of fear in the market.
Feeling overwhelmed? It’s okay to tune it all out. Skip the financial news, ignore the headlines, and give yourself permission to step back until the market settles down.
Still tempted to act out of fear or hype? That’s exactly when the pros make their money—by taking advantage of emotional investors. Don’t hand your gains over to them.
Plus, selling can trigger tax implications, and let’s be honest—the government doesn’t need more of your money either.
The bottom line? Take constructive action. Go for a run, read something uplifting, or refinance your student loan. Just leave your investment account alone and let it do its job.
Bull vs. Bear Market
A bear market happens when stock prices fall by 20% or more and stay low for a sustained period. It’s usually triggered by major economic issues like a recession, high inflation, or global conflicts (such as tariffs) that shake investor confidence. As fear spreads, more people sell their stocks, driving prices down even further.
During a bear market, investors often hesitate to buy because they’re uncertain about what’s coming next. Some companies may cut dividends—payments made to shareholders—to preserve cash. Overall, the mood is cautious and pessimistic. But bear markets don’t last forever. With patience and smart strategy, investors can come out stronger when the market recovers.
A bear market is not a technical definition as much as it is an expression of a particular market climate. However, some general parameters indicate this market condition.
A bear market occurs when stock prices drop by 20% or more and remain low for an extended period. It’s usually triggered by major economic events like a recession, rising inflation, or global instability that cause investors to lose confidence. As uncertainty spreads, more people sell off their stocks, pushing prices down even further.
In these periods, many investors hold back from buying because they’re unsure of what’s ahead. Some companies may also reduce or suspend dividends—cash payments to shareholders—to conserve resources.
While the overall mood is cautious and uncertain, it’s important to remember that bear markets are temporary. With the right mindset and long-term focus, investors can be well-positioned when the market rebounds.
Source: PRLog
While bull markets are more welcomed than bear markets, both are natural parts of the market cycle. Before you start investing, make sure you understand the difference between bull and bear trends so you know what to expect. It’s also important to assess your own financial situation and consider speaking with an investment professional to help guide your decisions.
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Bear Markets vs. Market Corrections
Bear markets and market corrections are often confused, but they’re not the same thing. While both involve falling stock prices, they differ in both scale and duration.
A market correction is a short-term dip of at least 10% from recent highs and typically resolves within a few months. It often comes after a market upswing and serves as a reset, not a crash.
Bear markets are defined as periods when stock prices drop by 20% or more from recent highs. They can last for varying durations, but on average, they span about 9 to 15 months.
While some bear markets are shorter—like the 2020 pandemic-induced bear market, which lasted only 33 days—others can extend for years, such as the bear market of 1973–74, which lasted over 20 months.
Bear markets are relatively common, occurring approximately every 3.5 to 5 years, depending on the time period analyzed. This means most investors will encounter bear market conditions multiple times during their investing journey.
Understanding their frequency and average duration can help investors stay focused on long-term goals rather than reacting emotionally to market downturns.
How to Handle a Bear Market
If you’re facing a bear market, there are a few important things to keep in mind. And yes—for this kind of bear, you can play dead!
Maintain Your Composure
When bear market conditions start to emerge, it’s normal to feel anxious about your investments and financial outlook. But the worst thing you can do is panic.
Many investors make the mistake of pulling their money out of the market when prices drop. This often locks in losses and prevents them from participating in the rebound when markets recover.
Think of it like facing a bear in the wild: staying calm is your best move. The same goes for your portfolio—sometimes the smartest action is to stay still and ride it out.
Ask for Advice
When you see signs of a potential bear market, don’t let fear take over. Instead of going it alone, reach out to a trusted financial advisor who can help you make rational, informed decisions during volatile times.
If friends or family are also panicking, try not to get caught up in the fear. It might even help to step back from the news cycle or avoid reading constant updates about the stock market for a while.
Think About the Long-Term
Bear markets are temporary, but your investment goals are long-term. That’s why it’s critical to play the long game. Consider how much you could benefit by staying invested through the downturn instead of reacting to short-term volatility.
Think of investing like driving. When you’re on the road, you don’t focus just a few feet in front of your car. Instead, you look toward the horizon to anticipate what’s ahead and make better decisions. The same goes for investing—keeping a long-term perspective helps you navigate the ups and downs more effectively.
Take the 2008 market crash as an example. Many people who panicked and sold at the bottom locked in their losses. But those who stayed the course and held onto their investments eventually saw the market recover and reach new highs. The key is to stay focused on your long-term goals rather than reacting to short-term turbulence.
Diversify Your Portfolio
When the market stabilizes, take the time to evaluate your portfolio and add diversified investments. A mix of stocks, bonds, cash, and other investments can help protect you from risk when the market takes a downturn.
It’s smart to be proactive about diversification before the market trends downward. Regularly look for opportunities to add diversified options to your portfolio to stay ahead of potential risks.
Diversification not only reduces the impact of a declining market but also increases your chances of benefiting from growth across different sectors. If you’re looking for inspiration, check out this expert-designed portfolio, The All Weather, for ideas on how to build a resilient investment strategy.
This portfolio's single goal is to make money in all market conditions regardless of interest rates, deflation, what new pandemic is threatening our shores, or who the POTUS is. It does this by focusing on growth and inflation cycles.
Billionaire hedge fund investor Ray Dalio designed the All Weather to thrive in any economic environment.
Here’s a curated list of other diversified investment strategies we’ve covered for more ideas:
- Coffeehouse Portfolio
- Swensen Portfolio
- Ivy Portfolio
- Larry Portfolio
- Lazy Portfolio
- Permanent Portfolio
- Minimum Variance Portfolio
Take advantage of buying opportunities
It’s important not to react emotionally to a bear market. However, making a few calculated moves can help you take advantage of the opportunities it presents.
Before jumping in, take a step back and assess your own financial situation. Do you have an emergency fund in place? Are you financially stable enough to handle potential losses? Understanding your finances will help you determine how much, if any, extra capital you can afford to invest.
During a bear market, many large companies see their stock prices drop significantly. This can be a great time to buy stocks at a low price, especially those likely to rebound when the market recovers. However, these investments should always align with your financial goals and risk tolerance.
As a general rule, never invest more than you’re willing to lose. If you have extra capital and feel confident about your financial stability, take advantage of the lower prices—but always do so with a clear strategy in mind.
Assess Your Risk Tolerance
Understanding your risk tolerance is crucial for building an investment strategy that aligns with both your financial goals and emotional capacity to handle market ups and downs.
If you find yourself losing sleep over potential losses during a bear market, it might be time to reassess your portfolio’s risk level. For example, if you’re nearing retirement, a high-risk portfolio may not be suitable. A balanced approach can help protect your investments while still providing growth opportunities.
Your financial stability also plays a key role in determining risk tolerance. Ask yourself:
- Do I have an emergency fund?
- How much debt am I carrying?
- What percentage of my income can I afford to invest?
If you’re planning for long-term growth, remember that the market trends upward over time. You don’t need an overly risky portfolio to grow your principal steadily. Instead, focus on diversification and asset allocation that match your comfort level with volatility and your financial goals.
By understanding your risk tolerance and capacity, you can avoid emotional decisions during market downturns and stay invested for the long haul.
Key Takeaways
- Bear markets are normal: They occur every 3.5–5 years and are part of healthy market cycles.
- Panic selling is risky: Emotional decisions often lead to locked-in losses.
- Long-term focus wins: Staying invested through downturns positions you for future growth.
- Diversification reduces risk: A well-balanced portfolio helps weather market volatility.
- Buy strategically: Downturns can be a smart time to invest in quality stocks at a discount.
The Big Bear Picture
If you take away one thing from all of this, let it be this: bear markets are normal. They’re a natural part of the economic cycle, not a sign that the sky is falling.
Yes, it’s smart to be cautious when the market is trending downward, but don’t be so cautious that you cash out too early and miss the rebound. Historically, markets recover—and those who stay the course are often the ones who benefit most.
Now is the time to stay proactive. Focus on proper diversification and smart decision-making so your portfolio can hold up during the rough patches and thrive during the recovery.
Bear markets aren’t rare or permanent. They’re just one phase of a larger cycle. The market was never meant to rise endlessly without dips. Prepare for the down moments, and you’ll be ready to take full advantage when the upswing returns.
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