8 Facts You Must Know About Bear Markets

All three major indexes are now in a bear market. And while bear markets can be terrifying, they're normal, inevitable and – most importantly – don't last forever.

what is a bear market in stocks
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The blue-chip Dow Jones Industrial Average was the last of the major indexes to fall into a bear market in 2022, but after a long holdout it finally succumbed in September.

Few things are scarier for equity investors than a bear market. Yet steep and sustained drawdowns in stocks are an absolute fact of investing life. Markets go through cycles; always have, always will.

It's also true that despite being inevitable and unpleasant, bear markets are not entirely all bad. An irony of bear markets is that they're one of the exceedingly rare times when long-term retail investors can actually have an advantage over the pros.

Traders and tacticians are under constant pressure to do something, even as a receding tide lowers all boats. Contrast that with retail investors, who are luxuriously free from clients yelling at them all day. Normies can just sit back and dollar-cost average into stocks at increasingly cheaper prices.

Most importantly, a patient long-term investor who is diversified in accordance with his or her age, stage in life and risk tolerance can not only wait out a bear market, but profit from it. Remember: The market can be miserable at times, but its long-term trend is always to the up and right.

A familiarity with the basics of bear markets should help investors better cope with the next one. To that end, we've compiled the following eight facts you must know about bear markets.

Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.