Investing term

What is Bear market?

A prolonged market decline, conventionally defined as 20%+ from recent highs.

A bear market is a sustained decline in prices, conventionally marked once a major index falls 20% or more from its recent high. It's the opposite of a bull market, and it usually comes with a gloomy mood — falling confidence, grim headlines, and the feeling that the decline won't stop.

Bear markets are a normal, recurring feature of investing, not a malfunction. They arrive every several years on average, and historically they have always eventually given way to recovery and new highs for diversified investors. The real danger is rarely the decline itself — it's selling near the bottom out of fear and missing the rebound that follows.

A 20%+ fall from the peak
8090100peak−20%+recovery−20% = bear marketA fall of 20%+ from the peak — normal, recurring, and historically followed by recovery.

A bear market is a drop of 20% or more from the recent high. It's a normal, recurring part of investing that has always eventually recovered — the danger is selling near the bottom.

For example

The S&P 500 falling from 5,000 to 4,000 is a textbook 20% bear market — painful, but the kind of drop long-term investors have repeatedly ridden through.

Learn it by doing

That's Bear market in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 3, Know Yourself: Risk Tolerance & Time Horizons).

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Why it matters to you

Bear markets matter because how you behave in them determines much of your lifetime return. They're when the behaviour gap opens widest — fear peaks exactly when prices are lowest, tempting investors to sell at the worst moment. Knowing that bears are normal, temporary, and historically followed by recovery is what lets you hold on, keep contributing, and even buy at a discount rather than capitulating at the bottom.

⚠ Selling to 'wait it out'

Going to cash during a bear market feels safe, but it usually means selling low and then facing the impossible task of buying back before the recovery — which never feels safe near the bottom. Investors who flee bears routinely miss the sharp early rebound. For long-term money, staying invested has consistently beaten trying to sidestep the decline.

Frequently asked questions

What defines a bear market?

The common definition is a fall of 20% or more in a major market index from its recent peak. A drop of 10–20% is usually called a correction. Bear markets often coincide with economic weakness and gloomy sentiment, but the 20% threshold is the standard marker.

How long do bear markets last?

It varies widely, but historically bear markets have tended to be shorter than the bull markets that follow them — often measured in months to a couple of years — and have always eventually recovered to new highs for diversified investors. The timing of any individual bear, however, can't be predicted.

What should I do in a bear market?

For long-term money, the evidence favours holding your plan, continuing to invest, and avoiding panic-selling. Bear markets let ongoing contributions buy at lower prices. Selling to sidestep the decline usually locks in losses and risks missing the rebound, which tends to be sharp and early.

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Related terms

Allocation driftThe slow movement of your portfolio away from its target mix as market values change.Asset allocationThe mix of stocks, bonds, and cash in a portfolio, expressed as percentages.DrawdownThe peak-to-trough fall in an investment's value before it recovers.Glide pathA planned shift in allocation over time — typically moving from stocks toward bonds as retirement approaches.
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