How to better handle a bear market

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While day-to-day market volatility is the reality of the stock market, there are periods when stock prices stay lower for longer – this is known as a bear market.

How to better handle a bear market

#1: What is a bear market?

A bear market happens when investors turn pessimistic about companies’ growth potential and profit outlook, and stock prices generally decline for an extended period of time, before hitting bottom.

How to better handle a bear market

#2: What is a bull market?

A bull market happens when investors are optimistic about companies’ growth potential and profit outlook, and stock prices generally rise for an extended period of time until hitting a peak.

How to better handle a bear market

#3: How long do bear markets last?

Every bear market is different, and it’s hard to predict when the next one will come. Bear markets can last for months – even years – and see stock prices fall by 20% or more.

How to better handle a bear market

#4: What is an example of a bear market?

One of the more memorable recent major bear markets followed the 2008 Financial Crisis. It lasted 17 months and saw the S&P 500 drop by 56%. That bear was triggered by risky borrowing which lead to the collapse or near- collapse of some of the most established financial institutions in the U.S.

How to better handle a bear market

#5: How can investors handle bear markets?

There is no one correct way to handle a bear market – every investor’s situation is different, depending on their risk tolerance and time horizon. Some tips for investors include: keep focused on the long-term, keep a diversified portfolio, stay calm and avoid emotional decisions, get investment advice from a qualified financial advisor, and revisit your investment plan and risk tolerance regularly.