Stock prices don't rise in a straight line. They move in long cycles of optimism and pessimism — bull markets and bear markets. Understanding the cycle helps you stay calm when it turns.
What the two terms mean
| Term | Plain meaning |
|---|---|
| Bull market | A sustained rise in prices, usually with a confident, optimistic mood. |
| Bear market | A fall of roughly 20% or more from a recent high, often with fear and pessimism. |
| Correction | A more modest drop of about 10% — common and usually short-lived. |
Why downturns are normal
Declines are not a malfunction; they're the price of admission for long-term returns. Corrections happen most years, and bear markets arrive every handful of years. Historically, markets have recovered from every one of them and gone on to new highs — though there's never a guarantee about timing.
Time in the market vs. timing the market
It's tempting to sell before a crash and buy back at the bottom. In practice almost nobody does this reliably: the best up-days often cluster right after the worst down-days, so investors who sell in a panic frequently miss the rebound.
Example: an investor who stayed fully invested through a turbulent decade typically ended up far ahead of one who tried to dodge the dips and got the timing wrong on the way back in.
The takeaway
You can't control the cycle, only your reaction to it. A long time horizon and a steady hand turn bear markets from a threat into an opportunity to keep buying good companies at lower prices.
