A bear market, characterized by a 20% drop in market values, offers an opportunity to evaluate your finances and investing—not make short-term, emotional changes.
Quick takeaways
What happens when a bear market takes a swipe at your investments, leaving you wanting to take cover? These periods of economic uncertainty may be an opportunity to cement your investment strategy, learn more about money invested, and strengthen your long-term financial foundation. And for new investors, a bear market, with its drop in value for many investments, is an opportunity to invest at lower (think "on sale") prices. Here are tips to consider during a bear market.
Bear markets are generally defined by a decline of 20% or more in recent stock market values. A bear market can happen for all sorts of reasons: economic uncertainty, reduced investor confidence, rising interest rates, declining profits, and global events to name a few. When that happens, people often sell their stock assets, prices tend to continue to fall, and even more investors sell. (Why a bear? Think of the way a bear attacks—swiping downward—much like falling market prices.)
A bear market is the opposite of a bull market; that’s when stock markets rise by 20% or more, and both confidence and economic indicators are positive. (A bull is charging ahead with lots of energy—thus the bull market.)
When markets decline and enter bear territory, it’s normal to want to take action and do something. But when it comes to markets, it’s generally not about timing the markets as much as it may be be time in the markets. Take this statistic: Bear markets last, on average, 286 days—nearly three times shorter than the average bull market, which lasts over 1,000 days.
That doesn’t mean there’s nothing you can do. Instead, consider:
- Start and build up emergency savings: Work up to putting aside three to six months of expenses to help safeguard against unexpected bills or even job disruption.
- Pay down high‑interest debt: Try to get rid of debt that costs you a lot in interest.
- Shore up protection for the unexpected: Check the status and amount of coverage you have for disability and life insurance to both safeguard your income and help protect your loved ones
- Stay diversified: Investments allocated across the three main asset classes (stocks, bonds, cash) help balance risk and growth potential.
- Invest regularly (a.k.a., dollar‑cost averaging): Dollar-cost averaging is simply investing at regular intervals (such as a monthly contribution to your retirement account savings). It’s consistent and ensures you’re buying both when prices are higher and when they’re lower.
- Keep the focus on the long term: If an investment made sense for you before a downturn, short‑term volatility alone may not be a reason to abandon it. Over the last 30 years, the stock market has grown around 10% annually.
Experience average stock market returns, June 2025. While the past is no guarantee of the future, dipping in and out of the market when there are short-term turns can damage your potential for compound growth.
If market swings make you unsure about what to do, you can also reassess your investment risk. That’s especially important as you move from one life stage to the next. For example:
- Early‑career investors may have time on their side. Market declines may also be opportunities to invest at lower prices and to maintain an asset allocation with a focus on growth potential and a longer time horizon.
- Mid‑career investors may benefit from consistent check-ins that their investment mix still aligns with their goals.
- Those nearing retirement, who may need access to their savings sooner, may often shift from less growth potential to an investment mix that’s typically balanced on stability.
Bear markets can test your confidence, but they don’t have to derail your plans. A clear strategy, strong financial basics, and a long‑term mindset can help you navigate periods of uncertainty more confidently.
Not every stock market downturn is a bear market. Understanding the difference between a market correction and a bear market can help you avoid overreacting to volatility. A market correction generally refers to a shorter‑term drop (think around 10%) often followed by a rebound.
Bear markets can test your confidence, but they don’t have to derail your plans. A clear strategy, strong financial basics, and a long‑term mindset can help you navigate periods of uncertainty more confidently.
The average bear market lasts less than a year—but if market swings are leaving you unsure about your next move, it may be a good time to step back and reassess your investment mix. Looking at how your portfolio is positioned can help put recent events in context and ensure your strategy still supports your long‑term goals—not just today’s headlines.
Want to check your investment mix?
