It’s Bear Out ThereIt’s official; we’re in a bear market. A bear market occurs when stock prices have declined at least 20% from their most recent high. What’s the most common cliche about making money in the stock market? “Buy low, sell high.” Despite all of the books, articles, blogs, podcasts, and TV shows, about how to make money in the stock market, there really is no secret, no alchemy or magic involved. Making money in the stock market is summed up in those four simple words. When are stock prices low? During a bear market.
It’s Simple But Not EasyThe biggest risk to successful investing isn’t a bear market, a recession, large-scale natural disasters, wars, or pandemics. It’s you. When the headlines are scary, new investors continue waiting things out before jumping in. And some current investors think, “Stuff this! I can’t take the stress. I’m getting out and going to cash until this settles down.” There are two problems with jumping out of the market in a downturn. Every yin has its yang, right? The yang to a bear market is a bull market. A bull market occurs when stock prices rise at least 20% from a previous drop. Let’s have a little history lesson:
- Between 1926 and 2021, there were 17 bear markets with declines ranging from 21% to 80%. Each lasted an average of 10 months.
- In that same span, there were 18 bull markets with increases ranging from 21% to 936%. Each lasted an average of 55 months.