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S&P 500 Falls Into Bear Market + Bear Market “Fun” Facts

After months of flirting with the bear, the S&P 500 finally closed in a bear market (20% loss from it's recent high).

*image sourced from the Wall Street Journal

I won’t lie to you, it definitely hasn’t been as fun posting our net worth updates this year (as it was last year when the market was ripping new ATHs seemingly every week) as each month that passes seems to be more brutal than the last. Our personal “record” this year for a month-over-month decrease was back in April when our net worth fell over $31,000!

As unfortunate as it was to watch live in person, the reality is that short-term volatility in the stock market is a feature, not a bug. Before this year, we were blessed with practically a 13-year bull market that started from the Global Financial Crisis bottom in 2009 – January 1, 2022. This 13-year run saw the S&P 500 accumulate a total return (price appreciation + dividends reinvested) of over 800%!

This remarkable 13-year bull run got many investors “fat and happy” with comfortable expectations that the market “only goes up.” Well, we are now officially being reminded that that assumption is definitely not the case.

The truth is bear markets are actually much more common than you may think! Not trying to say this in an exciting way, but more in an enlightening way that encourages you that this short-term roller-coaster ride is “par for the course” in the stock market over the short term. With all that being said, here are a couple of “fun” facts about bear markets that may help ease your current stresses (sourced from Hartford Funds):

  1. On average, stocks lose 36% in bear markets (S&P 500 is currently -22.2% from its recent high). Yet in bull markets (20% gain from recent low), stocks gain 114%
  2. On average, bear markets last about 9.5 months (289 days) whereas bull markets last 2.7 years (991 days)
  3. Since WWII, there have been 14 (now 15 after today) bear markets – meaning bear markets have occurred ~every 5.4 years
  4. While bear markets have represented ~20.6 of the years since 1929 (93 years), stocks have been rising 78% of the time
  5. Over a 50-year investment time horizon, you can expect to live through ~14 bear markets

Bear markets are never fun to live through at the moment, but I hope some of these long-term (average) statistics provide you some comfort during these times. There is no way to remove the volatility from the market as it’s a basic variable of the risk/reward equation.

In order to obtain greater long-term returns (stocks gain ~114% in bull markets), one must take on additional risk (stocks lose ~36% in bear markets). Risk and reward go hand in hand with each other, and downturns are just part of the game.

My wife and I's portfolio is now down over $79,000 from its ATH ($476,677 in March to $397,050 today).

Yet, we continue to stick to our long-term investment plan - Buy more index funds/ETFs every single month, ignore the constant negative news headlines, and hold for the long-term.

You don’t beat a bear market by trying to outthink it by panic selling your stocks, then trying to buy back in when the market goes up (timing the market). You beat it by simply weathering the storm (buying and holding) until brighter skies eventually return.

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