How to Invest During a Bear Market

By Financial Advisor Carrie McDonnell

“You make most of your money in a bear market, you just don’t realize it at the time.” Shelby Collum Davis, American businessman, investor, and philanthropist

Understandably, clients can find it difficult to invest, or stay invested, during volatile market conditions. It feels counterintuitive to put your hard earned money into a downturned market and even experienced investors waiver when faced with this decision. However, if you have a well diversified portfolio of low fee funds, staying invested is likely your best course of action in maximizing your long term returns.

An awareness of how markets have historically performed and how our emotions affect investment decisions can help calm investors and boost confidence during a bear market.

It’s important to understand that market volatility is nothing new. The twenty-year rolling return of the market over the last 50 years has ranged from 6% to 18%. Despite the various economic lows (Black Monday, 2008 financial crisis, dot-com bubble, covid crisis, etc.), the U.S. stock market has managed a twenty year average return of at least 6%. While past performance doesn't guarantee future performance, the stock market has a history of remarkable resilience, bouncing back again and again from bear markets.

The consistent relationship between the best performing days and the worst performing days is another reason to stay invested. Over the last 20 years, 25 of the best trading days were within one month of the 24 worst trading days.1 And here’s the thing: missing out on just 10 or 20 of the best performing market days can impact your long term investments in staggering ways potentially cutting your returns in half. In other words, it pays to stay.

Human emotions often guide our investment decisions in the worst ways, especially during a down market. As markets drop, fear reigns, causing investors to withdraw. In the “Cycle of Investor Emotion,” the maximum financial opportunity tends to be when the market, and your emotions, are at their lowest points. Warren Buffett’s advice for investors is to be “greedy when others are fearful.” Or just leave fear and greed out of the equation and apply basic consumer logic: buy when the price is low.

When market prices fluctuate dramatically, it’s natural to flinch, but instead of panicking, lean into the data and the knowledge of the market’s historical performance, turn off the financial news and reach out to a fiduciary financial advisor you trust.


1. BlackRock, Bloomberg, Morningstar as of 12/31/21


Get Started Today.

Please enter a first name.
Please enter a last name.
Please enter an email address.
Please enter a ZIP code.
1000 characters remaining
Please enter a message.
DIFFERENTIATORS
GETTING STARTED
MATERIALS
How We Are Different
Understanding Your Financial Statement
Articles by Dan Cunningham
Investing with Low Cost Index Funds
Pay Yourself First
Why Use a Fiduciary Financial Advisor?
Vermont Financial Planning
Quarterly Booklets
Financial Planning
Investor Resources
Investment Tools
Financial Firm Comparison
The Investment Process
One Day In July in the Media
Local Financial Advisor
How to Switch Financial Advisors
Frequently Asked Questions
Book Recommendations
Types of Investors
One Day In July Careers
Prospect Booklet
Square Mailers
Fee Calculator
SERVICES
Types of Accounts We Manage
Options for Self-Employed Retirement Plans
Saving Strategies
What to do When Receiving a Pension
Investment Tax Strategy: Tax Loss Harvesting
Vermont Investment Management
How to Invest an Inheritance
Investment Tax Strategy: Tax Lot Optimization
Vermont Retirement Planning
How to Make the Best 401k Selections
Investing for Retirement: 401k and More
Vermont Wealth Management
How to Rollover a 401k to an IRA
Investing in Bennington, VT
Vermont Financial Advisors
Investing in Albany, NY
Investing in Saratoga Springs, NY
New Hampshire Financial Advisors
INVESTING THOUGHTS
Should I Try to Time the Stock Market?
Mutual Funds vs. ETFs
Inflation
The Cycle of Investor Emotion
Countering Arguments Against Index Funds
Annuities - Why We Don't Sell Them
Taxes on Investments
How Financial Firms Bill
Low Investment Fees
Retirement Financial Planning
Investing in a Bear Market
Investing in Gold
Is Your Investment Advisor Worth One Percent?
Active vs. Passive Investment Management
Investment Risk vs. Investment Return
Who Supports Index Funds?
Investing Concepts
Does Stock Picking Work?
The Growth and Importance of Female Investors
Behavioral Economics
The Forward P/E Ratio

Vergennes, VT Financial Advisors

206 Main Street, Suite 20

Vergennes, VT 05491

(802) 777-9768

Wayne, PA Financial Advisors

851 Duportail Rd, 2nd Floor

Chesterbrook, PA 19087

(610) 673-0074

Burlington, VT Financial Advisors

77 College Street, Suite 3A

Burlington, VT 05401

(802) 503-8280

Middlebury, VT Financial Advisors

79 Court Street, Suite 1

Middlebury, VT 05753

(802) 829-6954

Hanover, NH Financial Advisors

26 South Main Street, Suite 4

Hanover, NH 03755

(802) 341-0188

Rutland, VT Financial Advisors

734 E US Route 4, Suite 7

Rutland, VT 05701

(802) 829-6954


v 2.4.53 | © One Day In July LLC. All Rights Reserved.