A bear market happens when the share prices of the biggest companies drop by 20% or more. It can feel quite unsettling, but bear markets are actually a normal part of the stock market. Since 1970, we’ve experienced 12 bear markets—about one every four to five years.
Although we’ve had some brief downturns, it’s been over a decade since we’ve had a long-lasting bear market. While no one can predict exactly when the next one will hit, we may be due for one soon. So, how do we prepare?
The answer is simple: by doing nothing.
Here’s why.
If you had invested £10,000 in the stock market 54 years ago, you would have gone through some tough times. During each of the 12 bear markets, your Investment would have dropped in value. In the worst case, it could have fallen by as much as 59%, leaving your £10,000 down to just £274 at one point. That’s a huge loss, and it would be easy to panic.
But here’s the good news: If you stayed invested, your £10,000 would have grown to nearly £3 million today! Yes, even with all the bear markets along the way, your money would have increased significantly because the stock market always recovers in the long run.
So how does this happen?
While bear markets knock prices down, they’re followed by bull markets, which are periods when prices rise again. Bull markets tend to last longer and push Investments higher than before. This means the key to long-term success is staying invested, even during the tough times.
It’s normal to feel nervous when the market drops, but remember, the companies behind those stocks—like Apple or Samsung—are still strong. The stock prices may fall, but the companies don’t suddenly lose their value. You’re still buying their products, right?
The real danger isn’t the bear market itself; it’s the temptation to sell when prices are low. Doing that turns what’s only a temporary drop into a real loss. The smart move is to stay invested and wait for the market to recover.
Bear markets are just a part of the journey, and they’re actually necessary to achieve the long-term returns we all want. So, as we face the possibility of another downturn, the question is: Are you ready to hold on for the ride?
If you’ve been with us for a while, you’ve likely weathered both bull and bear markets. The key to clearing the path to Financial success is to stay calm and not leap off the rollercoaster at the first tip. We’re here to ensure you stay on track – so when the next twist comes, don’t unbuckle or step out of the ride just yet. Reach out to us before making any hasty decisions on 02920 450 143 or email us on info@penguinwealth.com
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