How Will a Stock Market Crash Affect You? [Infographic + Video]

growling bear | how will a stock market crash affect me

Investing in the stock market can be unsettling, especially after stock prices have climbed sky high. At any given time, I ask myself “How will a stock market crash affect me?”

To get a very reasonable estimate for how much my net worth will decline in the next stock market crash I do this simple math: Multiply the amount invested in stocks by the average bear market decline of 32% (up to 50% – see below) and deduct the result from net our worth. 

This process is based on my experience of investing through several nasty stock market crashes over the past 40 years, and the revealing facts from looking at past bear markets.

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What’s the difference between a stock market crash and a bear market?

Historically, a stock market crash has been seen as a sudden, sharp and short drop.

Stock market crashes often signal the beginning of a long and arduous bear market so the two are intertwined.

I will use the terms interchangeably as I explain bear markets, along with some steps investors can consider to lessen the harmful affect a stock market crash, and subsequent bear market have on net worth.

The often tucked away reality amidst the glamour of investing is that stock market crashes will happen again.

The starting point to reduce investment risk from the next bear market is to simply be aware of how much the next bear market will affect your net worth.

How will a stock market crash affect you?

Here are the steps I take to estimate how a stock market crash will affect me.

You can watch the video with six steps for a slightly more advanced version, or you can take the 5 steps below the video, to get a reasonable estimate for how the next market crash will affect your net worth.

Click to Watch or Stop My Video “How Will A Stock Market Crash Affect You?”
 

1. Calculate Net Worth.

If you haven’t calculated your net worth lately, begin here. Simply add all your assets, and deduct everything you owe.

Remember to include home equity in your net worth calculation to get a more accurate representation of your net worth.

2. Total the amount of money in stocks.

Get very clear about the total amount that you have in stocks in various accounts, including funds, individual stocks and international stocks.

3. See how much a stock market crash will affect your stocks

Next, multiply the total invested in stocks by the average bear market decline of 32%.

Then you can assess if how you would handle this potential drop both strategically and emotionally.

While it’s a little scarier, I also multiple the total invested in the stock market by a drop of 50%. While this is a much bigger drop than the average stock market crash, it is much closer to more recent bear market declines.

I call this my Stock Drop Factor. It’s how much my stocks are likely to decline in value based on history, logic and math. 

As you can see, there are no emotions involved in this calculation.

You can also check out the types of stocks you’re invested in for an even more accurate estimate. Growth stocks drop the most in bear markets since they are usually the most overvalued, for example.

Value and dividend stocks drop less. (Read more below.)

4. Investments that go up when stocks go down

I also consider any investments that usually move in the opposite direction of stocks. For example, U.S. Treasury bonds often move go up when stocks go down.

Since I like to plan for the worse and hope for the best, I don’t count on Treasuries increasing in value, though, for two reasons.

First, Treasury bonds don’t always go up when stocks go down 100% of the time, as explained more later in this post.

It’s expected that Treasury bonds will go up when bonds go down, and there is a good probability that they will. If I’ve learned anything about investing, however, it’s that the unexpected sometimes happens.

Second, our home equity will probably also decline as a result of a stock market crash. I have never seen this not happen, in fact.

Realistically, this probable home value decrease will likely offset any increase in value from investing in U.S. Treasuries.

While most financial advisors compartmentalize home values from traditional investments, I like to look at the probable overall net worth affect since this is what effects me personally.

5. Estimate how much a stock market crash will affect net worth

To do this, I deduct my Stock Drop Factor from my current Net Worth for a reasonable estimate of how much a stock market crash will affect me.

With this information from the above 5 steps, I can take steps to protect my portfolio from crashing to an unacceptable level during the next stock market crash if I choose.

Plus, I feel more confident about my retirement plan surviving the next bear market, and maybe even benefiting from the next nasty bear market with preparation and conscious awareness.

Being Prepared for Stock Market Crashes

Knowing how a stock market crash will affect you helps you avoid that gut wrenching feeling from a drop in your stock portfolio when you didn’t have any idea how much it might be.

After almost forty years of investing (and more decades of life!) I have learned that when I have prepared for worse case scenario I can get through just about anything.

But first, I must have a good estimate of what that worse case scenario might be so I can reach a level of peace around my stock investments.

And when I am at peace I can more clearly overvalued stocks as well as the opportunities in undervalued investments that always surface as a result of bear stock markets amidst the fear and anxiety.

I can also have a sensible awareness of the trade offs between the risks and rewards of investing.

You're choosing a balance between risk and reward any time you invest consciously. #retirecertain #investor #retire Click To Tweet

Having gathered the results from taking the 5 steps above, I like to brainstorm a plan for surviving the next crash. You can even plan to thrive in the next bear market. Remember, bear markets present opportunities for those who are prepared.

Below is an infographic I made with these 5 steps to see how much a stock market crash will affect you. Download it so you will remember the steps and take them every now and then.

This awareness is very helpful when you feel worried about your stock investments because this knowledge is empowering and could even be a call to action.

Feel free to share it online or with anyone who may benefit from it, and then keep reading more about bear markets and how they can affect your net worth. (Hover over upper left side to Pin.)

How do I protect my portfolio from crashing?

I have considered (or taken) any of the following actions outlined below based our own financial goals and desired level of risk at the time.

You can choose what makes sense for your own situation, possibly with your financial advisor, for strategies to lower risk from stocks should you decide that your risk is too high after seeing how a stock market crash will affect you based on history and logic.

Buy and hold vs timing the market timing

A more proactive approach to investing with an anticipation of the next bear market isn’t really about short term market timing. It’s more about making investment decisions with a consideration of historical vs current investment valuations.

It’s about very long term stock market cycles that realistically and absolutely include stock market crashes.

Note that younger investors with a long term buy and hold plan may choose to do nothing in preparation for a bear market. They have the luxury of compounded wealth over time, along with decades of earnings power.

Investors over 50 and retirees may choose to lower investment risk as the stock market gets expensive relative to historical values as explained below. (Here’s my article on how to not outlive your money.)

bulls vs bears | how to avoid investing mistakesWays to lower investment risk

Remember, now that you know the potential risk in your stock investments, you can choose to lower your risk if you think think it is too high.

As you’ll read below, proactive and prepared investors can even embrace the experience to build wealth off the low valuations that surface as a result of bear markets.

You can feel the difference between investing from a place of knowing vs investing (or not) from fear.

Here are some ideas of ways to lower investment risk related to stock market crashes so they have less of an effect on you.

1. Increasing levels of cash.

Raising cash is the easiest way to lower investment risk. Here is my article about how much cash should be in your portfolio.

2. Investing in assets that are not usually correlated to the stock market.

Often Treasuries go up when stocks go down. Also, commodities go up during some bear markets, depending on the cause of the bear.

There is more information on this below.

3. Taking some profits during the bull market.

Many investors and financial advisors take profits from stocks as bull markets age and stocks get overvalued.

4. Creating one or more extra income streams.

Real estate, consulting or small business income streams can all enhance your overall wealth building strategy while lowering risk. (Our favorite life wealth building strategies are in my free ebook here.)

This will also allow you to avoid making retirement account withdrawals during the stock market crashes.

If you choose real estate investments, avoid overvalued markets since this increases risk, which you’re trying to reduce. Also, while the timing may vary some, stocks and real estate often move in tandem.

5. Reducing higher risk stocks

Reducing growth stock holdings and increasing defensive stocks, while being aware that almost all sectors tank during bear markets. (See below for stocks that do well during bear markets.)

Note: Be sure to bookmark this page and update your Stock Drop Factor as your investments change over time.

Now that you have a good estimate for how a stock market crash (or bear market) can affect you, and have some ideas for ways to lower risk, I’ll cover some important points about bear markets to give you a broader awareness.

Awareness helps you stay prepared for both investing opportunities and challenges so you can reach financial independence.

Why are there bull markets and bear markets?

Bull markets, bear markets and related stock market crashes occur because stocks rise and fall in relation to their earnings. A company’s earnings are tied to the economy.

The economy moves in cycles. While the Federal Reserve makes changes to the interest rate to try to keep the country out of a recession, this process is imperfect. Recessions still happen.

Stocks grow during the early phases of an expanding economy. This continues for several years.

The economy starts growing too fast, so the Federal Reserve raises interest rates to avoid prices rising too much given the soaring economy.

Higher rates slow down economic growth, which slows down profits. Lower profits means lower stock prices since stock prices are a multiple of earnings through the PE, Price Earnings ratio.

It all makes sense, right?

How do bear markets work?

Knowing how bear markets work can help you be more prepared and thus lessen the affect a bear market will have on your net worth. You’ll see signs ahead of stock market crashes since, usually, the economy is slowing.

The news will be reporting slower growth. This may also lead to an invested yield curve, a common event ahead of bear markets.

Investors become nervous.

Then, one or more political, global or economic catalysts often spook investors, causing them to sell initially. Other investors will either take advantage of the drop in prices, or they will sell their stocks, too.

Institutions such as banks and financial firms begin selling for their clients. Once this happens, the volume of stocks being sold becomes huge, which is significant as it leads to a selling fury.

This creates even more fear and volatility, which leads the stock market into a downward frenzy, often for a year or more.

What is the difference between bull and bear markets?

During a bull market stocks are rising. New highs are getting higher.

During a bear market, stocks are declining. New lows are getting lower.

This can easily be seen on a stock chart. Take a look at the screen shot of the S&P 500 index (SPY) from 2000 through mid 2019 which I took from my Schwab account below.

You can easily see the stock market crash in 2008 on the chart.

Note that the dollar values are on the right and the years are along the bottom.

stock chart | how much will a stock market crash affect me

How to know if we’re in a bear market or a bull market

It’s easy to tell if we are in a stock bear market. For one thing, if the market drops by more than 20%, it will be all over the financial news.

And you can look at a stock chart as shown above.

Sometimes, however, markets trade sideways making it unclear if we’re in a bear market or a bull market. The market do this just before they start a new trend up or down.

How long do bear markets last?

On average, bear markets last for 15 months. The 2008 bear market lasted 17 months. (1)

Between October 2007 to March 2009, the Dow Jones Industrial Average dropped 54%, for example.

The length of bear stock markets has a negative affect on almost all investors because they seem to drag on forever with little short up trends throughout the overall decline, giving investors false renewed hope followed by disappointment again.

How much do stocks drop during bear markets?

Stocks drop 32% on average in bear markets based on history. (1) This average decline includes the 2008 stock market correction.

It’s important to realize that a 32% decline seems fairly tame given the amount that the stock market usually rises during extended bull markets. The market can rise by 32% in one year alone.

The two bear markets between 2000 to 2010, however, saw declines of well over 50% in at least one of the major stock indexes.

These big drops in the first 2000 decade leads me to wonder if future bear stock markets will be worse from the prior average decline of 32%.

Given the ease with which institutions and individuals can sell quickly during volatile market drops given technical automation nowadays, this may well be the case, unfortunately.

What’s the difference between a bear market and a correction?

The stock market drops 10% or more during a correction. The stock market drops 20% or more during a bear market.

How will a stock market crash affect me if I sell my stocks?

This concept is very important so I always keep it in mind: If you do not sell when stocks have dropped in value, you will have an “unrealized loss”.

This means your net worth has dropped in value, but you have not officially incurred a loss since you did not sell.

Eventually, if bear market history repeats itself (and I believe it will), your stocks will get back to break even and beyond over time.

On the other hand, if you sell your stocks at a loss, you have a “realized loss”. (Read below about tax loss harvesting to reduce the pain.)

Click here to read my post How Much Do You Need to Live Off Investments with more about this.

What should you do during a bear market?

Ideally, your financial goals and wealth plan will guide you on what to do during a bear market. Creating a wealth plan during “normal” times as suggested earlier will help you to avoid reacting to bear markets emotionally.

Again, bear markets are a fact life for stock market investors. When doing financial planning, you can factor in this investing reality, so that you are prepared.

Knowing your Stock Drop Factor allows you to not panic due to the unexpected no longer being unexpected.

Reportedly, the biggest mistakes investors make is selling at stock market lows and buying at stock market highs. This is why having a wealth plan that anticipates bear markets will help avoid this common mistake.

In your wealth plan, you can decide if you choose to be a more proactive investor by reducing the amount of money you have in stocks as the markets become overvalued, or if you choose to buy or hold regardless of valuations. Neither is wrong, only a choice.

Potential tax benefits in a bear market

During a bear market, talk to your CPA about tax loss harvesting. This practice is selling stocks and capturing the loss for tax purposes.

Rules depend on the type of account you experience the losses in. Tax rules also vary and change often, so ask your CPA or do your own research as to whether you an take advantage of this easy bear market benefit.

What causes a bear market?

Bear markets are caused by different factors.

As mentioned more below, bubbles, inverted yield curves, and higher interest rates are common causes for bear markets. Sometimes large scale financial mismanagement causes bear markets.

For example, sloppy lending practices for over inflated real estate was the cause for the 2008 bear market.

Other times bear markets are triggered by global or geopolitical events.

What happens to bonds in a stock market crash?

US Treasury bonds are thought of as protection during stock market crashes. This is because investors flock to Treasury bonds during times of uncertainty. Therefore, most asset allocation portfolios have a percent invested in Treasury bonds.

Retirement portfolio models tend to have a high percent of wealth allocated to Treasuries to reduce risk.
Unfortunately, this simple investment portfolio “hedge” (protection) doesn’t always work. In the 1940’s and the 1970’s, both stocks and bonds declined. (2)

Prior to the 1990’s, stocks and bonds moved in the same direction (positively correlated) for 40 years. (3)

Knowing which assets go down during bear markets is very important, as you can see since this can lower your investment risk. But different types of investments don’t always behave the same in each bear market, making this tricky to perfect.

Do all stocks go down in a bear market?

Most stocks move in the direction of the overall market. One reason this happens is because of the movement in stock indexes.

Index investing has become hugely popular over the past couple of decades. Because investors and institutions will sell their index holdings as the stock market declines during bear markets (or buy during bull markets), the market moves even more as a whole than it did several decades ago.

Beta is a measure that shows how much a stock will move in relation to the overall market so you can check to see if a stock will  move less than the overall market (S&P 500 index) or more than the overall market, and by how much.

Do dividend stocks do better in a bear market?

Stocks that pay dividends tend to drop less during bear markets. One reason dividend stocks do better in a crash is because of the benefit of income from owning these stocks.

Think of it this way: If you own a stock that doesn’t pay dividends, you own that stock only for growth.
During a bear market, your growth stocks probably stop increasing in value, just like the rest of the market.

A dividend stock, on the other hand, pays an investor even when the stock declines in value unless the company stops it’s dividend payout, which is uncommon.

For this reason, many investors choose to continue to own dividend stocks during bear markets, especially retirees and income investors, like ourselves.

Do preferred stocks do better in bear markets?

Like dividend stocks, preferred stocks tend to do better in bear markets than the overall stock market. Preferred shares typically pay dividends, so the same income logic above applies to preferred stocks..

Second, investors prefer more safety during bear markets, so they are less likely to sell safer stocks. Since preferred shareholders have a stake above common shareholders in the event of a company liquidation, preferred shares are less risky than common stocks.

These two factors, stock income and lower risk, lead preferred stocks to do better in bear markets.

Which stocks go up during a bear market?

Recently, I researched stocks that were up in 2008. I found that from the small list of stocks that were up in 2008, most dropped steeply and whipped back up.

This volatile movement is little comfort during a bear market for someone seeking to lower risk from their investments but can work for long term stock investors.

Some sectors perform better, however, during bear markets, although they are unlikely to increase in value during a bear market since the market tends to move as a whole, as measured by Beta.

Being invested in these sectors during stock market crashes could lessen the affect it has on you.

1. Consumer staples, for example, decline less during bear markets than growth type stocks. This is because people need food staples, for example, no matter what.

2. My dad used to love utility stocks (and municipal bonds) because he said “The last thing to go out are the lights”. People pay their utility bills no matter what, making them safer stocks during bear markets.

3. Pharmaceutical stocks also tend to fall less during bear markets since people continue to buy their medicine.

4. Commodity stocks and etf’s (exchange traded funds) can do well during bear markets. This isn’t always the case, however. It depends on the reason for the bear market.

5. Lastly, value stocks tend to hold up better during bear markets since they were not as overvalued in the first place.

Can you make money in a bear market?

Rather than losing money, can you make money during the actual bear market?

Financial professionals who are “short” and are on the right side of the downward trend make money during bear markets. The movie The Big Short is an excellent example of this.

Keep in mind that if you own dividend paying stocks, you will continue to collect dividends during bear markets. That is, in essence, “making money” because you’re getting paid income, even though your net worth is probably dropping at least for a year or more.

Another way to make money during a bear market is by being invested in assets that increase in value when stocks are dropping. Treasury bonds are often thought of as being negatively correlated, as addressed elsewhere in this article.

Remember, identifying the assets that go up when stocks go down during a crash can be tricky, even for the best financial professionals. History can provide valuable insights about potential ways to make money in bear markets.

How do you profit from a bear market?

Investors can profit by taking advantage of the cheaper prices of stocks after the bear market. The years following bear markets tend to have huge positive returns off the lows.

While it’s almost impossible to catch the exact end of the bear market, getting in near the bottom allows you to buy high quality assets cheaply and enjoy the subsequent ride up for many years.

What are bear market investing strategies?

Bear market investing strategies range from waiting out the bear market to selling the stock market short.
Now, many proactive investors and wealth managers short the stock market during market crashes. This is done most often by simply buying a fund or etf that is short the market.

Being short means selling stocks that you don’t own. This can be very risky, but you can imagine how well this would work during a declining stock market.

This bear market investing strategy is best for very advanced investors since it has extra risk when the stock market heads back up.

Here is a post I wrote entitled Investment Strategies a High Net Worth Wealth Manager Uses to Lower Risk with sophisticated bear market strategies. 

As mentioned, another bear market investing strategy that indirectly can increase wealth by reducing expenses is tax loss harvesting.

What are the benefits of bear markets?

The benefits of bear markets are that investors can eventually buy cheaper stocks, plain and simple, but this requires that emotions be left out of investing.

Bear markets heighten fear about investing in stocks, even though stocks are much cheaper.

Again, knowing your Stock Drop Factor, and having a wealth plan before the bear market helps greatly.

A second benefit of bear markets applies to option sellers. Volatility increases during bear markets. For this reason, options sell at much higher premiums. This is advantageous for option sellers, such as covered call writers.

Unfortunately, covered call strategies alone don’t work well during bear markets since they are a bull market strategy. I have seen, however, very successful covered call strategies used with short etf’s during bear markets.

Higher option premiums remained for some time after the bull market of 2008. In early 2009, I began selling covered calls on a diversified investment portfolio in etf’s. It worked very well as an income generating strategy with little risk for some time.

Another benefit of bear markets is that investors become more proactive. It’s easy to get complacent when you’re making money in stocks while riding the upward bull market.

After bear markets, investors tend to pay better attention to their investments. They improve their cash flow.

As the old saying goes, we don’t realize the importance of something until it’s gone. There’s nothing like losing half the value of your stock account to become a more proactive investor.

Investors begin managing their investment risk better. Trust me, there’s nothing like the pain of a couple of bear markets to gain insights into how to lower investment risk related to bear markets.

Been there and done that.

How to take advantage of a bear market

As noted, some brave and sophisticated investors short the stock market during bear markets, but most investors wait out the decline in pain.

Often, there is little you can do unless you have extra cash.

If you’ve prepared for the bear market by raising investing cash as the stock market has become overvalued on the ride up, you have a huge advantage near the end of the bear market for buying cheap assets.

This is because most investors have their money tied up in the stock market and don’t want to sell at a loss.

Since stock prices drop, usually significantly, during bear markets, investors with cash can take advantage of bear markets buy buying cheaply after bear markets.

Be forewarned: Investors detest stocks after bear markets, but think about this: If you liked a stock that you owned before the bear market, you can probably buy more of the stock a lot cheaper than it was before the decline.

It’s the same stock as it was before unless there has been a fundamental change at the company.

Who doesn’t love a sale? This is an asset sale. What could be any better for investors?

What is a bear market rally?

Sometimes during bear markets, mini stock market rallies occur, called bear traps. It’s hard to know if the rally is a “bear trap”, or if the market has bottomed for good, and begun a new rally.

This makes it more challenging to time the bottom, but that’s okay since stocks are usually cheap for a long time once the bear market ends.

How do bear markets affect retirement savings?

Studies show that bear markets can be especially brutal just before, or early on in retirement. This is because people don’t have enough time to rebuild their retirement savings before they need to withdraw money to live.

This is one of the reasons we decided to create diversified multiple income streams ahead of early retirement. We want to delay (or avoid) retirement withdrawal strategies for as long as we can.

What are the best investments during a bear market?

The best investments during a bear market are those that either hold their value, or, even better, move counter to stocks. Cash, and short term debt instruments don’t decline in value.

Money market funds are usually the easiest way to buy very short term debt.

Specific investments that move opposite stocks can actually make money during bear markets, thereby reducing the negative affect of  the decline.

As mentioned, Treasury bonds usually do this, and sometimes commodities increase in value when stocks decline, also.

How to predict bear markets?

burning money | how will a stock market crash affect meKnowing how to predict a bear market helps investors position themselves more defensively ahead of them.

Some bear markets are more predictable than others while the exact timing can never be known, of course. It’s been said that the market climbs a wall of worry, and it’s true.

Financial analysts and wealth managers all have opinions, often in the opposite direction. They can both make great cases for both a continued bull market and also for a bear market.

Once a bull market has extended into valuation territory that is only seen right before stock market crashes, however, investors who want to lower their risk are wise to rethink their asset allocation.

A common telling sign of an upcoming bear market is “irrational exuberance”. This is when everyone loves the stock market, a little too much.

Bear markets become forgotten memories.

Investors tend to believe they can depend on the long term historical annual average of roughly 10% total return consistently forever.

The long term total return performance average varies from year to year. It varies even more from bull market to bear market, and back again.

There are, however, several ways to predict bear markets with increased probability, one of the most important investing words.

It stands to reason that when stock markets are overvalued, they are more likely to decline. Having said that, trends tend to last longer than you think they will last.

One of the most popular ways to measure the valuation of the market is with the Price to Earnings ratio. The Shiller PE ratio is considered very reliable since it is adjusted for inflation. This PE ratio is also called the CAPE ratio.

An inverted yield curve is another common precursor for bear markets, as well as several other measurements.

While any one of these measures may indicate a bear market at random given times, it gets my attention when several or all of the common measures indicate a highly over priced stock market.

The same can be said when all of these indicators indicate a cheap stock market. While these tools cannot necessarily predict a bear market, they can certainly be used to guide proactive investors looking to reduce risk ahead of bear markets.

What investments go up during a bear market?

Investors want safety during bear markets, so gold and other commodities, along with US Treasury bonds often rise in bear markets as mentioned.

Gold is often thought of as a safe investment during stock market crashes. However, there is the fundamental aspect of gold tied to supply demand since fewer people and companies buy gold during hard economic times. The demand decreases.

This can offset the perceived safety element of gold. I saw this happen in 2008.

As mentioned, US Treasuries often go up during a bear market, but not always.

How to prepare for a bear market

The best way to prepare for a bear market is to reduce your risk to the stock market.

There are several ways to prepare for a bear market as outlined above. Take the steps outlined above to estimate your Stock Drop Factor to see roughly how much a stock market crash will affect you.

Another way to prepare for a bear market is to accept the fact that if you are invested in stocks long enough, you will experience a bear market. Much like addressing death, people often say “if a bear market happens, what will my investments do?”

The question is: How will a stock market crash affect me when it happens, not “if” a market crash happens.

By accepting the fact that a bear market will happen, you can be prepared for it emotionally and strategically. You can take advantage of it.

If you work with a financial advisor, ask them to help you take the steps to estimate your Stock Drop Factor. The level of support you get will be great feedback for evaluating your financial advisor.

Should you sell during a bear market?

It is worth repeating that whether to sell during a bear market depends on your situation, priorities and long term financial goals. Selling early in a bear market to reduce risk and raise cash can make sense, however, many long term buy and hold investors prefer to stay in the markets.

Selling at or near the end of a bear market can have a huge negative impact on a portfolio since it gives you the loss from the down slide while missing the rise on the upswing.

How to invest near the end of a bear market

There is a huge opportunity for wealth building near the end of a bear market.

How you invest near the end of a bear market will depend, again, on your personal financial situation. Some investors choose to wait until the stock market is clearly in bull territory again.

Other investors buy into the stock market once they see the opportunity in low valuations knowing there may be more downside before there is significant upside.

Again, it is very hard to invest near the end of a bear market. Almost everyone hates stocks, except those rare investors who see the opportunities of cheap, high quality stocks.

How does the stock market affect interest rates?

Interest rates and stock market moves are intertwined. The Federal Reserve raises interest rates when the economy is growing too fast. This often triggers a bear market, as noted.

Then the Federal Reserve usually needs to lower interest rates to stimulate the economy late in a bear market.
All bear markets are a little different.

What was the worst bear market?

  • The stock market crash of 1929 was one of the worst bear markets. It led to the Great Depression that many of our parents and grandparents survived.
  • The Oil Embargo of 1973 triggered period of staggering stagflation.
  • The 2000 Tech Bubble bust was particularly nasty with the Nasdaq dropping about 60%.
  • The Financial Crisis of 2007 and bear market drop of over 50% in 2007-2009 initiated the great depression. (4)

Bear Market Summary

Stock market crashes are a fact of life for stock investors. Fortunately, bear markets can provide a wealth building opportunity for prepared and patient investors.

It’s the sudden and unexpected decrease in net worth that causes so much fear and pain around stock market crashes. Now that you’ve hopefully gained insight into how a stock market crash will affect you, you can choose to prepare, and even capitalize on the advantages of bear markets.

 

Wealth Building StrategiesHere’s our favorite income generating and wealth building strategies in my Free eBook.

 

 

This article is for education only and not to be taken as personal financial advice.

Content ideas and research sources:
1 CNBC https://www.cnbc.com/2015/08/24/8-things-you-need-to-know-about-bear-markets.html
2 https://www.marketwatch.com/story/stock-investors-couldnt-use-treasuries-for-safety-in-the-event-of-a-crash-2016-01-14

3. https://www.grahamcapital.com/Equity-Bond%20Correlation_Graham%20Research_2017.pdf

4 Business Insider https://www.businessinsider.com/historys-worst-bear-markets-2014-7

 

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