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In the financial world, you’ll often hear the terms “bull market” and “bear market” in reference to market conditions. These terms refer to extended periods of ups and downs in the financial markets. Because market conditions may directly affect investors’ portfolios, it’s important to understand the differences between them.
Knowing the basics of bull and bear markets — and potentially maintaining or adjusting your investment strategy accordingly — can help you make informed investing decisions.
Key Points
• A bull market is a period in which asset prices are rising, often reflected in a rise of 20% or more in major market indexes over two or more months.
• A bear market is a period in which prices have dropped from market highs, often reflected in falls of 20% or more in major market indexes over two or more months.
• Bull markets have historically lasted longer (about five years, on average) than bear markets (closer to a year, on average) and have tended to see greater average cumulative gains (around 150%) than the average bear market’s cumulative losses (about 30%).
• Markets are often unpredictable, and investors react to market shifts in many ways.
• It’s important to consider your investment goals and risk tolerance when making decisions in any market. Diversifying investments may also help manage risk during market shifts.
What Is a Bull Market?
A bull market is a period in the financial markets where asset prices are rising, and optimism tends to be high. A bull market is generally seen as a good thing for most investors because stock prices are on the upswing and it may indicate that the broader economy is growing.
It isn’t always easy to identify a bull market at first, and what qualifies as a bull market is often debated. However, a widely accepted benchmark is a 20% or greater rise in major market indexes over a period of two or more months.
The term “bull market” was coined in response to its predecessor, bear market. “Bears” became associated with speculators who sold investments in anticipation of prices falling. In the 1700s, “bull” was used to describe speculators purchasing assets with the anticipation that prices would rise, and the bull became the mascot for upward-trending markets.
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What Is a Bear Market?
Investors and market watchers generally define a bear market as a drop of 20% or more from market highs. When investors refer to a bear market, they usually mean that broad market indexes, such as the S&P 500 Index or the Dow Jones Industrial Average (DJIA), fell by 20% or more over at least two months.
The term “bear” has a long history. It can be traced back to an old proverb, warning that it isn’t wise to “sell the bear’s skin before one has caught the bear.” In time, “bear’s skin” became simply “bear,” and people started to use the term to describe speculators in the markets. Those speculators would sell investments with the belief that prices would soon fall, with the goal of buying them back at a lower price. From there, “bears” became associated with downward-trending markets.
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Bull vs Bear: Main Differences
The most obvious difference between bull and bear markets is that one is associated with a downward-trending market, and the other, with an upward-trending market. But there are other differences, as well.
For instance, bull markets tend to last longer than bear markets, although there’s no guarantee that any bull market will last longer than any particular bear market. According to historical market data, the average bull market lasts approximately five years, while the average bear market lasts closer to one year.
Typical gains and losses also tend to be lopsided between the two. The average cumulative gain over the course of a bull market is about 150%, while the average cumulative loss during a bear market is about 30% (though historical market patterns are not a guarantee of future performance).
| Bull vs Bear Market: Key Differences | |
|---|---|
| Bull Market | Bear Market |
| Upward-trending market | Downward-trending market |
| Average duration of about five years | Average duration of about one year |
| Average cumulative gains of ~150% | Average cumulative losses of ~30% |
How Is Investing Different During a Bull Market vs a Bear Market?
Depending on the individual investor, investing can be different during rising bull markets vs. declining bear markets. For some people, their investing habits may not change at all, but for others, their entire strategy may shift. A lot of it has to do with an investor’s personal risk tolerance, strategy, and investing timeline.
Some investors may adjust their portfolio allocations based on the level of risk they’re comfortable with and the amount of time they may have to absorb shorter-term market volatility. Other investors may maintain a consistent strategy regardless of market activity, and not change their investing habits at all.
Sticking to investing strategy can sometimes be a challenge for investors in bear markets, in particular, when the value of individual portfolios may decline. However, it’s also important to remember that bear markets and bull markets are cyclical. Bear markets tend to appear, on average, about every five years, typically followed by a longer bull market.
Whether market sentiment is optimistic or cautious, the psychological weight of market movements can lead to reactive decision-making. Staying anchored to a disciplined, well-structured financial plan can help investors manage emotional responses across every phase of the market cycle.
Investing During a Bull Market
Investors may choose to adopt different investment strategies during a bull market depending on their circumstances and goals.
Some investors may find it psychologically easier to invest during a bull market, when assets are (more broadly) appreciating, and they may see a more immediate unrealized return in their portfolio. However, this also comes with the risk of buying assets with potentially inflated values that may decline again in the future.
Other investors may choose to sell securities that have risen in value for profit or to reinvest gains in new investment opportunities. Some may wait to sell in a bull market in anticipation of market prices rising higher. However, no one knows when a peak will arrive, and attempting to time the stock market is challenging even for professional investors.
Many investors stick with a buy-and-hold strategy, where they maintain a long-term asset allocation strategy regardless of short-term price swings. While there are never guarantees in investing, this strategy gives them the chance to benefit from potential long-term market growth while avoiding emotional decision-making. Diversification can be an important part of this strategy to avoid taking on too much risk for individual circumstances. Diversification can’t guarantee profits, however, or fully protect investments in a declining market.
Investing During a Bear Market
Investing during a bear market requires balancing emotional discipline with a clear understanding of your overall financial goals. Bear markets can be particularly nerve-wracking since it can sometimes be difficult to see them coming. Some signs that a bear market may be looming include a slowing economy, increasing unemployment, declining profits for corporations, and decreasing consumer confidence, among other things.
Evaluating the potential risks of and opportunities for buying, selling, or holding assets in a bear market may help investors stick with their core strategy through volatile market cycles.
Buying
Buying stock during a bear market may allow an investor to secure a lower price, since the stock may rise in value over time as the market recovers. This is known as buying the dip.
However, this can be a form of timing the market, and there can be significant risks associated with trying to predict when certain stocks will hit bottom and buying them with the expectation of future gains. No one knows what the future holds, so there’s always a chance the price will keep falling.
Another tactic investors might be able to use is dollar-cost averaging (DCA), which is investing a fixed amount of money over time, so that chances of buying at high or low points are spread out over time. This allows investors to avoid emotional decision-making and attempting to time the market.
Dollar cost averaging comes with the risk of missing out on potential gains during rising markets, however, since a larger sum invested all at once earlier in a specified time period may yield a higher return. Dollar cost averaging also does not guarantee a profit or protect against losses in declining markets.
Recommended: The Pros and Cons of a Defensive Investment Strategy
Selling
When a bear market starts to set in, some investors may adjust their portfolio allocations — selling some types of assets and purchasing others — to align their portfolio with the level of risk they’re comfortable with.
Some investors may begin to sell their stocks to avoid further losses in a bear market. However, doing so could potentially lock in losses. An investor with a long-term strategy may choose to hold their investments and remain positioned to capture potential upside if the market rebounds. Broad market indexes have historically recovered from downturns over time, though individual portfolio recovery can vary.
Holding
If investors are investing for the long haul and comfortable with their portfolio mix, they may opt to hold their investment and/or maintain their predetermined strategy, no matter what’s happening in the markets in the short term. For example, investors might continue investing a set amount through their online brokerage in a robo or active investing account using a dollar cost averaging strategy. It’s worth remembering that market cycles are normal, and the same dynamism responsible for downturns may allow investors to experience gains at other times.
Overall, one way to prepare for a bear market is to try and remember that the market will likely, at some point, see a downturn. And, accordingly, to try and be prepared for it.
One way to do so could be to make sure your assets aren’t allocated in a way that’s riskier than you’re comfortable with — for example, by being overly invested in stocks in one company, industry, or region. In other words, make sure the diversification of your portfolio is in line with your risk tolerance and goals.
Examples of Bull and Bear Markets
From a historical perspective, bear markets are fairly common, occurring approximately every five years. In fact, dating back to 1929, the S&P 500 has experienced a decline of 20% or more at least 25 times, though these have been less frequent since 1945.
Most recently, the S&P 500 dropped roughly 20% in early April 2025 during the U.S. announcement of global tariffs in what was nearly a bear market. Prior to that, the most recent bear market was during 2022, amid the start of the current Ukraine conflict, and lasted approximately 280 days, with a market decline close to 30%.
Before that, there was a bear market in February and March 2020, when the pandemic initially hit the U.S., which saw the markets fall by more than 33%, but the bear market itself lasted only 33 days.
Going back even further, there was a relatively severe bear market in the early 1970s that lasted 630 days and saw the market decline by 48%. That makes more recent downturns look fairly tame in comparison.
The Takeaway
Bull and bear markets refer to rising and declining markets, respectively, with bear markets particularly notable as they represent declines of at least 20% in the market. Both bull and bear markets can have psychological as well as financial effects, and it’s important to understand what they are so you can try to adjust (or stick to) your strategy accordingly.
If you’re investing for decades down the road, one option may be to maintain a long-term investing strategy, regardless of what the market is doing, once you have an investment mix that is diversified and matches your comfort with risk. It may also be a good idea to speak with a financial professional for guidance.
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FAQ
What’s the difference between a bull market and a bear market?
A bull market is a period in which asset prices are rising, the economy may be expanding, and investors are generally feeling optimistic. A bear market is a period in which prices have fallen, usually by 20% or more (according to major market indexes) over two or more months.
How long do bull and bear markets last?
Bull markets tend to last longer, reaching an average of about five years, according to historical market cycles. The average bear market lasts closer to a year, though some bear markets are longer than others.
What should investors do in a bull market?
How an investor reacts to a bull market can vary depending on their strategy, risk tolerance, and goals. Investors focused on a long-term, buy-and-hold strategy may simply maintain their current investment plan. Some investors may wish to sell when stock prices are rising, though this could potentially mean missing out on future, longer-term gains.
Some investors are tempted to take on more risk when prices are rising. However, it may be a good idea to keep confidence in check during a bull market since it’s hard to know when a downswing may arrive.
What should investors do in a bear market?
Navigating a bear market can involve maintaining financial discipline, evaluating your personal goals and timeline, and avoiding panic-driven decisions. While market downturns can be uncomfortable, many investors focus on a few key strategies to help manage risk.
These may include maintaining an investment strategy focused on potential long-term growth, rather than shorter-term market volatility, and allocating assets in a portfolio to align with risk tolerance. Some investors may purchase stocks while prices are lower; however, keep in mind there’s no guarantee that a given stock will recover from a downturn.
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