Bull Markets and Bear Markets
The plain answer
Section titled “The plain answer”A bull market is a period when prices have risen a long way. A bear market is a period when prices have fallen a long way, often defined as a drop of about 20% from a recent high.
These labels describe what already happened. They do not tell you what happens next, and they do not require you to change a sound plan.
How it actually works
Section titled “How it actually works”Markets spend more calendar time rising than falling, but the falls are faster and more painful. A 20% drop can show up in months. Recoveries can take longer than the drop, or less. Nobody hands you a memo at the bottom.
The 20% figure is a convention, not a law. A 19% drop can feel the same in your account.
What this means for you
Section titled “What this means for you”If your allocation matches your timeline, a bear market is a test of whether you will keep contributing, not a test of whether you can guess the low. Keep buying the plan you already chose.
If a 40% stock drop would force you to sell to pay bills, your allocation is too aggressive. Fix that with cash and bonds you sized on purpose, not with a panic trade.
Common mistakes
Section titled “Common mistakes”Waiting to invest until the bear is “over.” The turn is visible only later.
Selling in a bear market to feel safe, then missing the recovery.
Treating a bull market as proof you are skilled.
Related pages
Section titled “Related pages”Educational content, not personalized financial, tax, or legal advice. No affiliate relationships. Figures are for tax year 2026 and change annually.Read the full disclaimer.