Falls are part of investing
Not a sign the plan failed.
All tracks and lessons
Bull and bear markets
Markets rise and fall in cycles. A plan made before the fall is the one that survives it.
In this lesson you will
- Define bull, bear and correction
- Understand why timing the market is hard
- Write a plan for the next decline
A bull market is a sustained rise in prices; a bear market is a sustained fall. A common definition of a bear market is a decline of 20% or more from a recent high, and a correction is often described as a fall of about 10%.
Declines are normal
Broad stock markets have historically experienced corrections and bear markets regularly, and have also recovered from them over time — though recoveries have taken anywhere from months to years, and past patterns do not guarantee the future.
Why timing is hard
Some of the strongest days have historically come close to some of the worst. Selling after a fall and waiting to feel safe can mean missing the recovery.
A plan for the next fall
- Keep money needed within a few years out of stocks.
- Hold an emergency fund so you never have to sell in a downturn.
- Keep investing on a schedule; regular purchases buy more shares at lower prices.
- Rebalance back to your chosen mix.
Education only — GetGuac does not recommend individual stocks.
By the GetGuac team · Editorial policy
Three ideas to keep
Recovery days cluster near bad days
Timing is hard.
Cash prevents forced selling
An emergency fund protects investments.
Do it in 4 steps
Separate short-term money
Out of stocks.
Confirm your emergency fund
Months of essentials.
Automate contributions
Keep buying.
Write your rebalancing rule
Before the fall.
A fall and a recovery, in percentages
Illustrative arithmetic on a $10,000 portfolio.
| Step | Change | Value |
|---|---|---|
| Start | $10,000 | |
| Bear market | −25% | $7,500 |
| Recovery needed to get back | +33.3% | $10,000 |
A 25% fall needs a 33.3% rise to recover — one reason selling at the bottom locks in the hardest part.
Where this usually goes wrong
- Selling after a fall and waiting to feel safe
- Investing emergency money
- Stopping contributions in a downturn
Write one sentence describing what you will do the next time markets fall 20%.
Tools and guides for this lesson
Quick quiz
1. A common definition of a bear market is a fall of…
2. Why is timing the market hard?
3. What protects you from selling in a downturn?
0 of 3 answered
Puzzle
A portfolio falls 40%. What percentage gain is needed to get back to where it started?
Show the answer
About 66.7%
$100 → $60. $60 × (1 + x) = $100, so x = 40 ÷ 60 ≈ 0.667.