Bear Market Investing: Strategies to Invest Wisely

A bear market happens when stock prices drop significantly — typically by 20% or more from recent highs — leading to uncertainty and anxiety for many investors.

SingSaver Team

written_by SingSaver Team

updated: Apr 22, 2025

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It’s natural to feel uneasy during these periods. Sharp market declines often trigger emotional responses, especially when retirement plans or long-term goals are involved. However, downturns are a normal part of the financial cycle, and with the right approach, investors can make informed decisions that support their future.

This guide walks through key strategies for investing during a bear market, offering practical insights to help you stay grounded and position your portfolio for recovery.

» Learn more: What is a bull market and a bear market? 

Understanding bear markets: what are they?

A bear market happens when the value of a broad market index, like the S&P 500 or Dow Jones, drops by 20% or more from its recent peak. It’s more than just a bad day or week on the market — it reflects a sustained downward trend, usually driven by negative investor sentiment, uncertainty, or a weakening economy.

Now, it’s important to distinguish a bear market from a market correction. A correction refers to a shorter-term dip, typically between 10% and 20%, and often resolves more quickly. A bear market, on the other hand, tends to last longer and can go much deeper than just a 20% loss.

During these periods, confidence tends to drop, and you might notice investors reacting more emotionally — even positive news often gets overlooked. Selling pressure builds, driving prices down further. That said, bear markets don’t last forever. Eventually, lower stock prices start to look attractive again, and buying picks up, helping the market recover.

Bear markets can affect an entire index — dragging down most stocks, even those that are still performing well individually. You might also see bear markets within specific sectors or even single companies, but those usually don’t carry the same widespread impact.

Some notable past bear markets include the 2008 global financial crisis and the early 2020 COVID-19 crash — both of which shook investor confidence but eventually gave way to strong rebounds. Understanding how bear markets work can help you make smarter decisions and stay focused on your long-term goals, even when the outlook feels uncertain.

» Find out more: What to do when the stock market crashes

Signs we might be in a bear market today

Identifying whether we’re in a bear market involves more than just checking price charts. Market analysts look at a mix of economic indicators, including:

  • Prolonged declines in major stock indexes

  • Rising interest rates

  • Soaring inflation

  • Weakening consumer confidence

  • Slowing corporate earnings

While some indices may show sharp declines, confirming a bear market requires assessing overall market sentiment and the broader economic landscape. Always consult credible financial sources or experts for a clearer view.

Causes of a bear market and how long they last

You’ve probably heard that bear markets often show up when the economy starts slowing down — sometimes right before or just after a recession hits. But that’s not always the case.

Investors will keep an eye on things like job growth, wages, inflation, and interest rates. When those numbers start slipping, it can signal that the economy’s cooling off. That’s when many of us start worrying about falling company profits — and when enough people start selling their stocks, the market can drop fast. That kind of pullback is what defines a bear market.

With the April 2025 market drop, for example. Many traders were worried that a new round of tariffs might kick off a global trade war, which in turn could lead to a worldwide recession. Fears like these can spark quick sell-offs and steep declines.

Now, here’s the good news: Bear markets don’t last forever. On average, they run for about 363 days — far shorter than the average bull market, which typically stretches out for over 1,700 days. And while downturns might bring average losses of around 33%, bull markets have historically delivered much bigger gains — up to 159% on average, according to data from Invesco.

So while it’s natural to feel uneasy during a bear market, it helps to remember that these cycles are part of the bigger picture — and the market has always found a way to bounce back.

Smart investment moves to make in a bear market

While bear markets can feel overwhelming, they don’t necessarily mean you should stop investing. Instead, it’s about adjusting your approach and staying consistent. Here are four key strategies:

1. Use dollar-cost averaging

Trying to predict the exact bottom of the market can often lead to missed opportunities or bigger losses. Instead of timing the market, consider dollar-cost averaging—a method where you invest a fixed amount at regular intervals, regardless of share price. This approach helps smooth out purchase prices over time, allowing you to buy more shares when prices dip and fewer when they rise. It’s a disciplined way to stay invested without putting all your money in at once.

Bear markets can be unnerving, but they also offer potential buying opportunities for long-term investors.

» New to investments? Learn about: Investment strategies for new investors

2. Diversify your investments

A well-diversified portfolio is key to weathering market volatility. Since not all sectors or assets react the same way during downturns, spreading your investments across various asset classes—such as stocks, bonds, and real estate—can help reduce your exposure to sharp declines in any one area.

During economic slowdowns, defensive investments like dividend-paying stocks and high-quality bonds can offer more stability. Bonds, in particular, often act as a buffer when equities falter, while dividend stocks provide consistent income even when growth slows.

3. Focus on defensive sectors that stay resilient

Certain industries tend to hold up better when the economy contracts. Think about essentials people can’t go without—like groceries, healthcare, and utilities. These defensive sectors typically show greater resilience during bear markets.

You can gain exposure to these industries through sector-specific ETFs or index funds, which offer instant diversification across leading companies in those fields. This lowers your risk compared to buying individual stocks while still positioning your portfolio for relative stability.

» Learn more: How to safeguard your investment portfolio during a recession

4. Stick to long-term goals

Market downturns are stressful, but history shows that bear markets are temporary. Over time, markets recover and often reach new highs. If your investment goals are years or even decades away—such as saving for retirement—it's important to stay the course and avoid panic selling.

Trying to outsmart the market or react to every dip can do more harm than good. For some, working with a financial advisor or using a robo-advisor can help manage emotions and maintain discipline during volatile periods.

» Discover our: Top picks of the best robo-advisors in 2025 

Use this time to review your investment plan. If your asset allocation still aligns with your goals, stick with it. If not, a bear market could be a good opportunity to rebalance without triggering large capital gains taxes.

Bear market vs market correction: Key differences

A market correction is a 10% drop in the price of a security, market, or index from its most recent high. While unsettling, corrections are typically brief and part of normal market fluctuations. For example, between 2009 (the end of the Global Financial Crisis) and 2020 (the beginning of the COVID-19 pandemic), the S&P 500 experienced five separate corrections during a prolonged bull market.

In contrast, a bear market represents a more extended and deeper downturn — defined by a decline of 20% or more — and usually reflects broader economic stress. Though corrections can occasionally lead to bear markets, most do not. While no one can forecast market movements with complete certainty, historical data spanning 75 years shows that bear markets are relatively uncommon.

Understanding the difference helps investors choose the right strategy: staying the course during corrections versus taking a more measured approach during bear markets.

Navigating and growing through bear markets

Watching markets drop sharply can feel unsettling — especially when prices fall 20% or more. But making decisions driven by fear often leads to missed opportunities and long-term setbacks.

Bear markets are a normal phase in the economic cycle. While they can be challenging, they also present opportunities for level-headed investors to strengthen their portfolios. Approaches like consistent investing, spreading out risk, focusing on resilient sectors, and keeping a long-term perspective can help weather the downturn.

To ensure your approach aligns with your personal financial goals, risk tolerance, and investment timeline, it's wise to consult a licensed financial advisor. With the right plan, you can stay grounded through market volatility — and be ready to grow when the rebound comes.

» Discover the best places to put your money during a recession

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SingSaver Team

SingSaver Team

At SingSaver, we make personal finance accessible with easy to understand personal finance reads, tools and money hacks that simplify all of life’s financial decisions for you.