Brown grizzly bear. widely open mouth.
(Image credit: Getty Images)

Now that we're officially well into bear-market territory now, the question is: How do you invest in the midst of one?

The Dow Jones Industrial Average dropped into bear territory on Wednesday, March 11. The S&P 500 and Nasdaq followed suit the following day, as Thursday, March 12, saw the biggest drop in the stock market since the 1987 market crash. For those not versed in market lingo, a bear market is a decline of 20% or more in stocks. This is more severe than a stock market correction, which is a decline of 10% to just under 20%.

These numbers are arbitrary, of course. As an investor, you don't necessarily care if your portfolio drops by exactly 20% or if it loses just 19%. But semantics aside, the bear market is here and growling with a vengeance.

It's been a while since we've had a proper bear market – the last one was during the 2008 financial crisis. For a few, it's entirely possible that this is the first one you've had to live through as an investor.

But even if you're a grizzled market veteran, this bear market – which is being fueled by a global pandemic, in the form of the COVID-19 coronavirus outbreak – has been full of surprises. It's the fastest bear market in history as measured by the length of time it took stocks to fall from new all-time highs to official bear territory. It took the Dow Industrials just 20 days to drop into bear territory, and the S&P 500 and Nasdaq just 21.

Today, we're going to cover the basics of how to invest in bear markets and make a portfolio action plan. The coming weeks might be rough, but we'll get through this together.

Charles Lewis Sizemore, CFA
Contributing Writer,

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.