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The most important thing to remember about a bear market is to follow a risk-appropriate plan rather than improvise in response to falling prices. That plan should reflect when you need the money, how much loss you can absorb, and whether your savings can cover near-term expenses.
What counts as a bear market?
Investor.gov, the U.S. Securities and Exchange Commission’s investor education site, defines a bear market generally as a period when a broad market index falls by 20% or more over at least two months. That is a conventional description, not a universal legal threshold or a prediction. It also does not mean every investment—or every stock—has fallen by 20%. Investor.gov’s bear-market glossary explains the term.
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Why a plan matters more when prices are falling
Falling prices can make it tempting to sell in a rush or to change course based on predictions about what the market will do next. But timing a downturn is uncertain: selling may avoid further losses, or it may lock in a loss and leave an investor unsure when to return. The SEC’s October 5, 2026 World Investor Week bulletin warns that trying to time the market might lead investors to buy at highs and sell while prices are falling, reducing returns. It does not mean every investor who sells will lose money. Read the SEC bulletin.
A useful plan is specific enough to guide decisions before stress sets in. The SEC’s investor guidance recommends considering financial goals, risk tolerance, time horizon, diversification, and the effect of fees. Lori Schock, then director of the SEC’s Office of Investor Education and Assistance, described a risk-appropriate, diversified plan as a way to manage volatility; the page carrying that statement is no longer updated, so treat it as a historical perspective rather than current agency guidance. SEC guidance on risk and return.
What to check before changing investments
When will you need the money?
Money earmarked for a near-term expense has less time to recover from a decline than money invested toward a distant goal. If withdrawals are approaching, reconsider whether the current allocation leaves enough accessible funds for those needs. The right balance depends on the goal and personal circumstances; there is no single allocation that fits everyone.
Could an emergency force you to sell?
Cash savings can help cover unexpected expenses without requiring a sale of investments during a downturn. The SEC’s 2026 bulletin gives three to six months of living expenses as an example savings goal, not a rule for every household. Income stability, expenses, debt, and other resources affect what is suitable.
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Is the portfolio exposed to too much of one risk?
Diversification means spreading investments across and within asset classes rather than relying heavily on a single holding or market segment. It can reduce the impact of a loss in one investment, but it cannot guarantee against losses when the market falls. The SEC’s Saving and Investing guide discusses diversification and the limits of historical performance.
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Does the plan still match your ability to take risk?
Risk tolerance is not only about how uncomfortable a decline feels. Consider your goals, income, debt, other assets, and capacity to withstand losses. If a market drop reveals that the portfolio’s risk is beyond what you can bear—or that your circumstances have changed—review the plan deliberately rather than making a rushed trade based on a prediction.
Is investing regularly during a bear market always the answer?
No. Regular investing can be part of a long-term plan, and it means purchases may buy more shares when prices are lower. It is not a promise of a return or a reason to invest money needed for rent, debt payments, or other expenses. Continue only if the amount, timing, and investment risk still fit your goals and financial circumstances. The SEC’s 2026 bulletin discusses regular investing alongside the risks of trying to time the market.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How much can history tell you?
Past performance describes what happened, not what will happen next. In a September 15, 2022 investor bulletin, the SEC put it plainly: “Past performance is actual historical performance information. However, past performance cannot predict how an investment strategy will perform in the future.” Historical figures also depend on the time period, fees, assumptions, and benchmark used, so a past recovery or return should not be treated as a timetable or forecast. Read the SEC performance bulletin.
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A practical way to respond
- Write down the goal and date. Identify what the money is for and when you expect to use it.
- Check near-term cash needs. Review emergency savings, upcoming expenses, and high-interest debt before deciding whether to invest more or sell.
- Review concentration and fees. Check whether one investment or market segment dominates and account for fees when comparing options.
- Compare the current portfolio with your plan. If your goals or circumstances have changed, decide whether an adjustment is warranted for that reason—not because you think you can identify the market bottom.
- Get qualified help if the decision is unclear. A financial professional can help assess how your goals and circumstances relate to investment risk; confirm how the professional is compensated and what services are provided.
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