bear market
A market condition in which prices are falling or expected to fall, typically by 20% or more from recent highs.
Example
“During the bear market of 2022, many tech stocks lost more than half their value.”
Memory Tip
A bear swipes DOWN with its claws. Bear market = prices going down.
Why It Matters
Bear markets are a normal recurring feature of investing. Since 1928 the S&P 500 has experienced over 25 bear markets. Knowing this helps long-term investors resist panic selling at the bottom which is the single most damaging thing an investor can do to their long-term returns.
Common Misconception
Many investors believe they should sell everything when a bear market begins and buy back in at the bottom. In practice timing this correctly is nearly impossible. Studies consistently show that missing just the 10 best days in the market over a 20-year period can cut your returns in half.
In Practice
During the 2020 COVID bear market the S&P 500 dropped 34% in just 33 days. Investors who sold at the bottom locked in their losses. Those who stayed invested saw the market fully recover within 5 months and go on to new highs by year end.
Etymology
From the saying 'selling the bear's skin before catching the bear' — early traders who sold shares they didn't own yet, betting prices would fall.
Common Misspellings
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Related Terms
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