Bear vs. Bull Markets: The Smart Investor’s Guide to Surviving Both

If you invest long enough, you’ll experience both bull markets and bear markets. One feels great. The other feels awful. But both are normal parts of how markets function. The real difference between successful investors and struggling ones often comes down to how they behave when markets get uncomfortable.

I’ve found that market cycles don’t destroy wealth nearly as often as poor decisions during those cycles do. Understanding how bear and bull markets work and how to respond can dramatically improve long-term results.

Let’s put this into perspective.

What Bear and Bull Markets Actually Mean
A bear market is generally defined as a market decline of 20% or more from recent highs. They’re often tied to economic slowdowns or recessions, though not always. Historically, the U.S. market has experienced dozens of bear markets over the past century, and many but not all coincided with recessions.

A bull market, on the other hand, is a sustained period of rising prices and investor optimism. And here’s the encouraging part: bull markets historically last much longer than bear markets. Long-term data shows bull markets can last several years on average, while bear markets typically last closer to a year or so.

In other words, downturns tend to be shorter than upswings but they feel longer emotionally.

The Emotional Trap Investors Fall Into
Bear markets trigger fear. That fear often pushes investors to do the wrong thing at the wrong time. Selling after a drop locks in losses. Moving entirely to cash can feel safe, but it often means missing the recovery.

One of the most damaging mistakes I see is abandoning a long-term plan during a short-term storm. Market declines are not a sign that investing is broken. They’re a feature of investing.

Another issue is dipping into emergency funds for non-emergencies. When markets fall and job uncertainty rises, preserving liquidity matters more than ever. Your emergency fund exists to protect your investments from forced selling — not to fund lifestyle upgrades.

History Shows the Value of Staying Invested
Market history provides a powerful lesson. Over long periods, diversified investors who stayed invested generally fared better than those who tried to time exits and re-entries.

A classic example: missing just a handful of the market’s best days can dramatically reduce long-term returns. And those best days often occur close to the worst days, frequently during volatile periods when many investors are sitting on the sidelines.

This is why market timing is so difficult. You have to be right twice when to get out and when to get back in. Most people aren’t.

Diversification Still Works
Different assets perform differently in different environments. There have been periods when U.S. stocks struggled but international stocks or value stocks performed better. No single asset class leads all the time.

That’s why diversification remains a core principle. Spreading investments across asset types, sectors, and regions helps smooth the ride and reduces reliance on one outcome.

Rebalancing also plays a role. When markets drop, rebalancing can mean buying more of what’s down and trimming what’s up. It’s a disciplined way to “buy low” without guessing.

Dollar-Cost Averaging Reduces Stress
Dollar-cost averaging investing a fixed amount on a regular schedule — helps remove emotion from the process. You buy more shares when prices are low and fewer when prices are high. Over time, that averages your cost basis and reduces the pressure to time the market.

For long-term investors, consistency often beats cleverness.

Using Downturns for Tax Strategy
Bear markets can create tax opportunities. Tax-loss harvesting allows you to sell investments at a loss to offset gains elsewhere. If you realize a loss, you can use it to offset capital gains and even reduce some ordinary income.

There are rules, of course. The IRS wash-sale rule prevents you from buying the exact same security within 30 days. But similar — not identical investments can maintain market exposure while capturing the loss.

Done properly, this strategy can improve after-tax returns without changing your overall plan.

Why Most Investors Should Avoid Short Selling
Short selling is sometimes marketed as a way to profit in downturns. But it’s complex and risky. Losses can theoretically be unlimited if markets rise. Long-short funds exist, but they’re not simple tools for most households.

For the vast majority of investors, building a resilient long-term plan works better than trying to profit from declines.

The Real Key: A Long-Term Plan
The most important strategy isn’t tactical it’s structural. A clear, long-term investment plan aligned with your goals, timeline, and risk tolerance provides stability during volatile periods.

Cash reserves matter. Asset allocation matters. Discipline matters. Reacting emotionally usually hurts more than it helps.

Markets will rise and fall. That’s not the risk you should fear. The real risk is abandoning a sound plan because the ride gets bumpy.

Investing success rarely comes from predicting the next bear market. It comes from being prepared for one before it arrives and staying the course when it does.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.