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Review that decision when you need the money soon, your job or health circumstances have changed, your risk capacity is lower, your holdings are unusually concentrated, or you depend on portfolio withdrawals. Those situations call for cash-flow and allocation planning—not an automatic instruction to sell everything.
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What “bear-market territory” tells you—and what it does not
A bear market is commonly described as a decline of at least 20% from a recent peak in a broad market index. The threshold describes what has already happened; it does not tell you how far prices will fall, when they will bottom, or how long your own portfolio will take to recover.
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Three different clocks are often confused:
- Bear-market duration: how long an index remains in a bear-market decline under a particular methodology.
- Drawdown duration: how long an index or portfolio stays below a previous high.
- Recovery time: how long it takes to regain that high, which can be longer than the decline itself.
Because these measures use different starting points and definitions, an average bear-market length is not a personal holding-period recommendation. A diversified portfolio, an individual stock, and a portfolio being depleted by withdrawals can all have different recovery paths.
This is general educational information, not individualized investment advice. Historical index results do not predict the outcome for your holdings after fees, taxes, contributions, withdrawals and timing.
The historical record gives context, not a countdown
U.S. bear and bull markets since 1966
Charles Schwab reported Schwab Center for Financial Research calculations showing that U.S. bear markets since 1966 lasted about 15 months on average and produced an average decline of 38%. The same comparison found bull markets lasted nearly six years on average and gained approximately 210%. These are source-reported historical averages, not a forecast for a current downturn or for your account.
Global-equity episodes through 2023
Vanguard calculations using MSCI World through 1987 and MSCI ACWI thereafter found that, from 1980 through December 31, 2023, global-equity bear markets lasted 282 days on average and had an average return of negative 30%. Bull markets averaged 1,018 days and a positive 96%. The figures were reported in an August 13, 2024 Vanguard article and use a different index set and methodology from the Schwab U.S. series. Read the Vanguard market-volatility guidance for its stated framework.
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Neither series says how long a particular investor should remain invested. Averages can be distorted by a few unusually long or severe episodes, and a current decline may not resemble the historical sample.
How long until a new S&P 500 high?
Another Schwab Center analysis of S&P 500 data from 1975 through 2025 examined rolling calendar windows. Average maximum drawdown was 15% for one-calendar-year windows, 21% for any two consecutive calendar years and 31% for any five consecutive calendar years. Average time to a new index high was 7.7 months, 11 months and 17 months, respectively.
In 39 of 50 single-year drawdowns in that analysis, a new high arrived within five months; seven times, it took a year or longer. Those results refer to an index and to the specified rolling windows. Your portfolio may recover sooner or later because of its asset mix, fees, taxes, cash flows and withdrawals.
A recovery can differ by allocation
Schwab illustrates the distinction with one historical episode: a hypothetical portfolio invested 60% in the S&P 500 and 40% in the Bloomberg Barclays Aggregate Bond Index, rebalanced twice a year, recovered from the March 2009 low and regained its prior peak in November 2010. The S&P 500 itself did not regain its prior peak until March 2013. Diversification changed the path in that example, but it did not eliminate losses or guarantee a profit.
The first question is whether your plan still fits
Before changing investments, compare your current circumstances with the assumptions behind your plan. Work through these questions in order:
- What is the money for? Separate long-term goals such as retirement decades away from a house deposit, tuition payment or emergency reserve needed soon.
- When will you spend it? A longer horizon gives a portfolio more time to recover, but it never guarantees recovery within that horizon.
- Has your cash-flow situation changed? Job loss, a higher risk of job loss, a health event or a large new obligation can reduce your ability to tolerate investment losses.
- Can you still tolerate the planned decline? Risk capacity is the financial ability to absorb losses; risk tolerance is your emotional willingness to do so. A plan that causes panic selling is not functioning as intended.
- Is the portfolio diversified? A concentrated position, a single sector or a narrow country exposure can behave very differently from the broad index used in a headline statistic.
Vanguard senior manager Randy Lee summarizes the controllable part of the decision this way: “While economic developments and market volatility are beyond your control, you can control your financial decisions and your long-term strategy.”
When staying invested is usually consistent with the plan
Remaining invested is generally consistent with a long-term strategy when all of the following are true:
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- Your goal is years away and near-term spending is covered outside volatile assets.
- Your income, emergency savings and insurance remain adequate.
- Your target allocation still matches your capacity and willingness to take risk.
- The portfolio is diversified in a way you understand.
- You can rebalance according to the plan instead of reacting to headlines.
Staying invested does not mean ignoring your account. It means making only the changes your written plan allows, such as rebalancing when an asset class moves outside its target range or directing new contributions toward underweight holdings. Do not increase risk simply because prices have fallen unless your plan and capacity support that change.
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Near-term spending needs
Money needed in the short or medium term may belong in cash or other lower-volatility reserves rather than in assets that could be down when bills arrive. Building that reserve can prevent a forced sale of long-term investments during a decline. Cash serves a liquidity purpose; it is not an interchangeable substitute for long-term growth assets.
A changed job or income outlook
If you lost a job, expect layoffs, became self-employed, or otherwise lost dependable income, your ability to take risk may have changed even if your age and goals did not. Recalculate essential expenses, emergency savings and the amount that must remain liquid before deciding whether the allocation is still appropriate.
A changed goal or deadline
A purchase brought forward, a shortened retirement date or a new education obligation can turn long-term money into near-term money. The correct response may be to segregate the amount required for that goal and leave the remainder invested, rather than liquidating the entire portfolio.
A concentrated or speculative holding
Broad-market history cannot be applied to a single company, highly leveraged fund or narrow theme. If one holding dominates your outcome, risk management may require reducing that concentration according to a tax-aware plan, regardless of whether a broad index is in a bear market.
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Why selling creates a second, difficult decision
Moving to cash can stop further market losses temporarily, but it also creates a re-entry problem. You must decide not only that the market is unsafe, but also when it is safe enough to buy again. Waiting for confirmation can mean buying after a substantial rebound.
Schwab’s illustration of this timing risk used S&P 500 returns from 2006 through 2025: an investor who remained fully invested earned an annualized 11% in the example, compared with 6.6% when the 10 best days were excluded and 1.6% when the 30 best days were excluded. These are historical calculations, not a promise that a particular investor would earn those returns. They show why missing a small number of strong days can materially alter a long-term result; strong days can occur close to other highly volatile days.
Selling can still be rational when your objective, liquidity requirement or risk capacity changed. The mistake is treating a forecast of the bottom as a prerequisite for every allocation decision.
A practical review process
- Write down the goal and date. List each account’s purpose, the expected withdrawal date and the amount likely to be needed.
- Ring-fence near-term cash. Identify emergency savings and scheduled spending for the short and medium term. Do not count money exposed to a possible large loss as guaranteed spending cash.
- Check the target allocation. Compare current percentages with the plan’s ranges. Separate allocation drift from a deliberate change in risk.
- Test a severe but plausible loss. Ask whether you could continue the plan, pay essential bills and avoid selling in a downturn of the size your allocation has historically experienced. No historical test guarantees the next loss.
- Choose a rule before acting. If rebalancing, specify the threshold, date and assets to trade. If reducing risk, document the new target and the conditions—such as a changed goal or income situation—that would permit a later increase.
- Review taxes and account rules. Sales can realize gains or losses and may affect retirement-account restrictions, benefits or required distributions. Obtain individualized tax or investment advice when those consequences matter.
Special considerations for people taking withdrawals
Accumulating investors can often keep contributing through a decline. A retiree or anyone drawing regular income must also manage the order and timing of sales. Selling depressed assets to fund essential spending can lock in losses and leave fewer assets to participate in a recovery.
A withdrawal plan can therefore include a cash reserve for near-term payments, flexible discretionary spending and selective sales from assets that are not as depressed or that have drifted above target. The appropriate reserve size and spending adjustment depend on income sources, expenses, taxes, account types and health of the plan; no single withdrawal percentage applies to everyone.
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Review whether withdrawals can be temporarily reduced, delayed or funded from a different allocation sleeve without compromising essential needs. If the portfolio cannot support required spending under a reasonable range of outcomes, seek personal advice rather than relying on a rule to stay fully invested.
What diversification can—and cannot—do
Combining assets that do not move in lockstep can reduce the size of some portfolio declines and change the recovery experience, as the 60/40 historical illustration demonstrates. Diversification cannot ensure a profit, prevent losses in a declining market or make every asset recover at the same time. Bonds, international stocks, real-estate securities and other assets carry their own interest-rate, credit, currency and liquidity risks.
Check what “diversified” means in your account: the number of holdings, exposure to one employer or sector, overlap among funds, and the share held in cash. A portfolio can contain many funds yet still be concentrated in the same underlying companies.
Why a long horizon still requires realistic expectations
The U.S. Securities and Exchange Commission’s Saving and Investing guide emphasizes that every investment involves risk and that an investor can lose some or all of the amount invested. Its example notes that someone who invested all their money at the 1929 market peak waited more than 20 years for the market to return to that level. The example is a warning against assuming that every recovery arrives quickly or within a convenient personal horizon.
Long-term investing is therefore a process of matching risk to a goal, maintaining liquidity and accepting uncertainty—not a guarantee that an index or account will recover on schedule.
Questions to ask before you trade
- Am I responding to a changed financial fact or only to a frightening headline?
- Which specific goal requires money, and on what date?
- Would selling solve a liquidity problem, or simply postpone it until I must decide when to buy back?
- Does my allocation still match my risk capacity after considering income, debt and emergency savings?
- What taxes, fees and account restrictions would this transaction create?
- What written rule will tell me to rebalance or change risk again?
Charles Schwab’s investor-education conclusion is that having a long-term strategic asset-allocation plan and sticking to it through periods of volatility are among the keys to long-term investment success. That principle applies only when the plan still reflects your goals and ability to take risk; a changed life situation warrants a deliberate review.
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