If a Bear Market Is Coming, History Says This Strategy Will Set Investors Up for Long-Term Success

1 month ago 17

David Dierking, The Motley Fool

Thu, July 30, 2026 astatine 7:50 AM CDT 3 min read

Bear markets often amusement up retired of the bluish and without warning. Consider the existent correction we're seeing successful semiconductor stocks. Both the VanEck Semiconductor ETF and the iShares Semiconductor ETF are astir 20% disconnected their highs acceptable lone astir a period ago. A batch of investors thought that artificial-intelligence-driven stocks would support rising indefinitely. But they're susceptible to pullbacks similar thing else.

Historically, 20% carnivore markets successful the S&P 500 (SNPINDEX: ^GSPC) hap astir erstwhile each 4 years. Losses of 30% oregon much person occurred astir erstwhile each 10 years. Every azygous time, the scale has gone connected to yet acceptable a caller high. Whether your idiosyncratic portfolio establishes caller highs, however, depends connected your subject and what you bash erstwhile banal prices are falling.

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Why selling aft stocks person fallen usually makes the concern worse

Take these 2 historical carnivore markets:

During the 2008 fiscal crisis, the S&P 500 mislaid 57% of its worth from highest to valley. Investors who sold astatine oregon adjacent the bottommost successful March 2009 locked successful those losses and astir apt remained retired of the marketplace until agelong aft the betterment began.
The 2020 COVID-19 clang saw the S&P 500 driblet by much than 30% successful conscionable a fewer weeks. A batch of folks were astir apt told that the system was astir to travel to a implicit halt and decided to sell, again locking successful losses. Those radical apt missed retired connected the crisp and abrupt rebound that pushed the scale backmost to a caller precocious by August.

In some cases, investors who sold debased and stayed connected the sidelines permanently damaged their semipermanent returns. Long-term investing involves staying invested done marketplace declines since you person years to recover, successful theory. But if you enactment during those times, you're precise apt to travel retired behind.

Dollar-cost averaging tin assistance investors instrumentality vantage of declines

On the different hand, staying invested AND continuing to marque scheduled periodic investments, specified arsenic into a 401(k) plan, tin really assistance you travel retired up during a carnivore market.

That's due to the fact that you're buying shares astatine little prices than you mightiness spot again aft the betterment has begun. Once a caller precocious is yet established, you would, successful theory, retrieve everything you'd lost. But you'd besides spot gains connected each of those purchases you made during the carnivore market.

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