When a bear market gets long and drawn out, as this one has, it is normal for investors to consider getting out; stopping the losses. It’s normal and there are a lot of conversations between advisors and their clients that center around this market.

The Long Drawn Out Bear Market

It has dogged us and the media rubs our noses in it. The negative sentiment is everywhere. It’s at work, at home, at the grocery store. It has dragged us down for almost a year now and investors are tired. Exhausted even. When will it end and can we make it that far? I think this quote has never been more important, except probably in 2008 when Warren Buffet wrote it in an opinion piece in The New York Times, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”

To further his point, if your dentist, your golf buddy and your middle school best friend are all telling you to buy the newest great market investment, be fearful. When everyone is telling you to bail on the stock market as a whole, it might be time to get ‘greedy.’ What are you hearing from people right now?

The Bear vs The Bull

The Oxford Dictionary says a bear market is “a market in which prices are falling, encouraging selling.” A bear market can be intimidating and unnerving, especially when no one knows for certain how long it will last. The fundamental truth of a bear market is that asset prices go down and the fundamental truth of a bull market is that asset prices go up.

How to Win In a Bear Market

Technically, winning in a bear market happens by investing during the bear market and holding it through the bull run, where the speed of which wealth is transferred is unlike any other period. Sounds simple, right? It is, unless you have human emotions and any miniscule amount of fear.

Of course, none of us want to lose money and all of us would like to sit on the sidelines peacefully while the bear market runs its course. Unfortunately, no one can truly predict the stock market and no one knows when to get out of a sliding market. More importantly, no one can know when to get back in so that they may take advantage of the impending wealth transfer to it’s fullest extent.

Believe in Businesses

In 2021 Warren Buffet explained in a shareholder letter, “[W]e own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.” That being said, do you believe the companies you’re invested in will survive? For example, if you own Amazon and it is currently down 49%, do you believe it will survive and that you will continue to see Amazon Prime packages delivered to your neighbor’s porch for many years to come? Yes. Yes, we all believe Amazon will survive. So why give up on it now? Why lock in your losses? Instead, consider buying more Amazon. Let me explain:

Capturing Wealth

The 2008 recession occurred over a three-and-a-half year period, meaning it took three-and-a-half years to drop and then return to it’s previous high. The S&P dropped roughly 50% in 2008 (I’m using rough numbers for easy math). It’s high was 1500 and it fell to 750 (roughly). For the savvy investors that can see the transfer of wealth opportunity on the horizon, they invested somewhere toward the bottom, because no one can call the actual bottom. Let’s say they bought in at 800. It took about three years for the S&P to double their investment. Three years to double your money. THIS is how you capture the transfer of wealth in a bear market.

Anyone that sold out between 1500 and 750, locked in their losses. Selling on fear of the market is understandable. Fifty percent is a painful blow for anyone to endure. However, if you are feeling fearful of the bear market and you sell, then often times the fear will also drive the decision to buy back in, meaning you will have missed a significant part of the recovery and you will be the one transferring wealth to the investors that are holding/buying. In our article Retirement Is Scary we discuss timing the markets and how in the past 20 year period, seven of the best investing days happened within about two weeks of the 10 worst days. If fear drives your sell, it will be nearly impossible to buy back in so close to one of the worst days in 20 years.


I didn’t plan this article around Warren Buffet quotes but since his quotes have basically written it, let’s end with another piece of wisdom from him: “I can’t predict the short-term movements of the stock market. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.” For me it is easy to miss the most important point of this quote – the market will move higher BEFORE people start to feel comfortable again. It will move BEFORE the economy stops showing signs of recession. The market leads us into recession, and it leads us out, meaning the market data is immediate and it prices in the end of a recession before the Fed reports are printed and the media can make their announcements. It’s a lot to consider. Let us help you.

The writer of this blog is not a registered investment advisor or broker/dealer and does not make security recommendations nor provide financial advice. Readers are advised that the material contained herein should be used solely for informational purposes, and to consult their personal tax and/or financial advisors as to its applicability to their circumstances. Investing involves risk, including the loss of principal.