Bear market

A bear market is an extended period of falling prices across stocksTermStock×السهمA share of ownership in a company, bought and sold on a stock exchange, that may pay dividends and rise or fall in value.Open the term and other assets. The technical definition begins when prices drop 20% from their most recent high and persist at depressed levels for a considerable time.

During a bear market, pessimism spreads among investors, prompting rapid selling that deepens the decline. Prices may drift downward gradually or plunge sharply, and trading volume can rise or fall depending on the intensity of the panic.

If you own stocks or equity funds, their value falls on paper, but that loss becomes real only if you sell. Anyone who needs cash soon faces the difficult version of the choice: sell at depressed prices, or wait and hope.

The arithmetic of getting back is the part that surprises people, because it is not symmetric. A 20% fall needs a 25% rise to return to where it started. A 50% fall needs 100%. That gap widens the further a market drops, which is why how deep a decline goes matters more to your recovery than how long it lasts, and why sitting out the worst of one is worth more than catching the exact bottom of it — a thing nobody reliably does anyway.

Which makes the useful decision an early one rather than a brave one. A bear market only converts a paper loss into a real loss when something forces you to sell into it: a school fee, a deposit on a house, a job ending. So the money you know you will need in the next two or three years does not belong in the market at all, and that is settled years before any decline arrives. Working out how many months of spending you would have to raise from your portfolio in a bad year is a calculation you can do this afternoon, and it is worth more than any view about where the bottom is.

• A bear market is a normal part of market cycles, not an anomaly. Historically they occur multiple times per decade.
• The 20% decline is the technical definition, but markets often fall much further before stabilizing.
• If you hold stocks or equity funds, you see your portfolio value drop, but dividendTermDividend×توزيعات الأرباحA payment a company makes to its shareholders from profits, usually in cash or additional shares.Open the term payments may continue depending on company performance.
• Bear markets create opportunities to buy at lower prices, but timing the bottom is impossible.