Despite recent stock-market highs, uncertainty lingers. Geopolitical tensions, high interest rates, and inflation concerns remain. In the past, these have in some way contributed to bear markets that have torn through portfolios.
A bear market is defined as when stock prices drop by at least 20 percent from a recent high. And investors don’t need to look far back to observe the damage it can do.
The last bear market roared in 2022 when the benchmark S&P 500 Index—commonly seen as representative of overall stock market performance—plunged around 25 percent. And a short, but fierce, bear market emerged in 2020 during the COVID-19 pandemic when the index fell around 34 percent.
But if you’re worried about a bear market, there are some defensive moves you can make. So let’s take a closer look.
Create a Cushion
This strategy can help you during any market cycle, but it becomes especially effective for those entering retirement during a market downturn.
Some investors set up a liquid buffer or stash using cash along with generally low-risk assets like money market funds and short-term bonds. Ideally, these should cover one to three years worth of living expenses.
In a market downturn, you can resort to this stash to cover immediate needs rather than drawing from other assets like stocks, mutual funds and ETFs. In that scenario, you’re selling shares at a loss. And that would lock in those losses, prevent those shares from growing when the market recovers, and erode your portfolio at a faster pace. This is associated with the sequence of returns risk affecting retirees.
Continue Contributing to Your Retirement Plan
Although your retirement portfolio can seem dismal in a bear market, you should continue contributing regularly to your 401(k) or IRA. This allows you to buy more shares at lower prices. And those additional shares can also benefit from growth when the market picks up.
And if you’re receiving an employer match, that should give you even more good reason to keep funding your 401(k).
Consider Rebalancing Your Portfolio
A bear market can push your asset allocation off balance. For instance, suppose your asset allocation breaks down to 60 percent stocks and 40 percent bonds. A nearly 20 percent drop in stocks could clip your stock weight down to around 55 percent.
So you can sell some bonds and buy some stocks at lower prices to bring you back to your targeted asset allocation.
It can seem counterproductive to purchase tumbling stocks. But think of it as buying stocks on sale and sticking to your game plan. Your asset allocation was set to reflect your unique investment goals and time horizon. So it’s important to stay on target and to remain diversified.
Don’t Panic
So we’ve discussed selling securities to bring you back to your target allocation. But during bear markets, some investors get so terrified that they want to sell everything and leave the market before all plummets to zero.
That’s a dangerous move. You’ll completely miss out on the benefits of market recovery. And history has shown us that all bad things must come to an end.
A Lookback on Bear Markets
Twenty-seven bear markets in the S&P 500 Index have occurred since 1928, according to an analysis by Hartford Funds. But a bear market doesn’t tend to stick around too long. The average such downturn lasts about 9.6 months.
And however that may sound like a long time when your numbers keep declining, consider this. A bull market occurs when stock prices jump at least 20 percent from a previous low. And the average length of a bull market is 2.7 years, according to the Hartford Funds study. And while stocks lose 35 percent on average in a bear market, stocks gain 112 percent on average in a bull market, the firm reports.
The Bottom Line
A bear market can be alarming for investors, especially when retirement dollars are at stake. But it helps to remain resilient and stick to your plan. By staying invested, you’re essentially buying stock shares at a premium and these could grow when markets recover. It’s also important to revisit your portfolio and see if it may be a good time to rebalance.
However, avoid panic selling. Bear markets don’t last forever—and a bull market may be around the corner.
The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
