🐻 Bear Market Survival Guide

The playbook to go through a market plunge unscathed

Apr 11, 2025

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1. 📉 What is a bear market?

A bear market is typically defined as a drop of 20% or more from recent highs in a major stock index—like the S&P 500 or Nasdaq.

It’s more than a number—it’s a psychological turning point

We’ve seen it before.

Since 1945, the S&P 500 has experienced 15 bear markets:

📉 Average decline: -32%
⏳ Time to bottom: ~11 months
📈 Time to recover: ~1.7 years

These numbers vary—but the pattern is familiar.

Markets fall. Investors panic. Recovery follows.

If we are in an average bear market, we’ll reach a bottom early next year and won’t hit a new high until the end of 2026.

Sounds daunting? Not with the right mindset. If you’re a net buyer of stocks, it’s your chance to scoop up great companies on sale. Shelby Cullom Davis explained:

“You make most of your money in a bear market; you just don’t realize it at the time.”

The key is understanding that bear markets are normal.

So the real question isn’t if they’ll happen again.

It’s how you’ll respond when they do.

2. 📊 What history tells us

Here is the historical frequency of drawdowns identified since 1928:

Most bear markets feel endless in the moment.

But in hindsight, they were temporary setbacks on a long upward trend.

Yes, there have been outliers:

1973–74, when inflation raged.
2000, the dot-com bubble.
2008, the Great Recession.

Each took 4+ years to recover. But they were also rare.

In 12 out of the 15 bear markets since 1945, investors broke even in under 3 years.

📈 More importantly, rebounds tend to begin before things feel safe.

Peter Lynch once said:

“Every economic recovery since WWII has been preceded by a stock market rally. And these rallies often start when conditions are grim.”

Trying to wait for perfect conditions means missing the early gains.

That’s why staying invested—even when it’s hard—is usually the smarter move.

One of the great ironies of investing: stocks are the only thing people hate to buy when they go on sale.

Volatility is the price of admission for better returns.

Morgan Housel calls it “a feature, not a bug.”

When prices fall, there’s always something to worry about.

Global pandemics. Recessions. Trade wars. Inflation. You name it.

The fear of a potential recession will make headlines for the foreseeable future. Critically, perma bears will claim that the world order has changed and stocks may never recover. The catch? They always say this.

In his book Beating the Street, Peter Lynch explained:

“This one is different,” is the doomsayer's litany, and, in fact, every recession is different, but that doesn't mean it's going to ruin us."

On average:

📉 Recessions last 11 months.
📈 Expansions last nearly 6 years.

The takeaway? Why spend all your time preparing for recessions—when they’re brief, unpredictable, and often already priced in?

Even with perfect knowledge of the economy, you wouldn’t be able to consistently time your trades. The market tends to rebound long before the economic news improves.

Despite knowing this, investors still try to outsmart the cycle.

But as history shows, market timing is a weapon of alpha destruction.

The better strategy? Stay in the game. Let time and patience do the heavy lifting.

And yet… the S&P 500 has returned ~10% annually, including dividends, for nearly a century.

That’s the hard part of long-term investing.

You must stay optimistic in a world that constantly tells you not to be.

📌 Bottom line: Bear markets are part of the cycle—and history shows that patient investors are often rewarded.

3. 🧠 The psychology of downturns

It’s not the math—it’s the mind games.

Markets fall all the time. But a bear market? That’s when it feels personal.

🔻 Your portfolio shrinks.
🔻 The headlines get darker.
🔻 Every bounce feels fleeting.

You don’t know how bad it’ll get. Or how long it’ll last.

The real pain isn’t the drop—it’s the uncertainty.

Here’s why:

🔮 We extrapolate. A 20% drop feels like it’s heading to 50%.
🕰️ We feel the need to act—even if doing nothing is smarter.
🧠 Our brains crave patterns—but markets rarely tell a clear story.
📉 We confuse volatility with a permanent loss of capital.

This is when good investors make bad decisions:

Selling too soon.
Freezing and hoarding cash.
Chasing safety after the market already plunged.

📉 Most underperformance doesn’t come from picking the wrong stocks.

It comes from reacting poorly when fear takes over.

When the emotional fog rolls in, your best defense isn’t timing the market.

It’s having a plan—and sticking to it.

4. 🏗️ How to stay invested

When prices fall, discipline—not prediction—is your superpower.

You don’t need to time the bottom.

You need a system you can stick to in the worst moments.

Here comes the obligatory Lynch quote:

“The most important organ in investing is not the brain, it's the stomach.”

📆 Find your system

Volatility isn’t a reason to abandon ship. It’s a reason to lean into a process that removes guesswork.

✍️ Journaling and documenting can help you spot patterns in your behavior and past investments—and prevent knee-jerk reactions.
🗓️ Automating your strategy gives you a playbook when emotions run high. For example, you can define when you can buy and sell.

In short, asking, “What did I plan to do in this situation?” is often more effective than reacting in the moment.

In a meltdown, discipline beats brilliance.

Over the years, I’ve found that having a simple rule-based system helps me stay grounded. Here are the 4 rules I follow to protect my portfolio:

I invest a fixed amount monthly — rain or shine.
I don’t add to losers — keeping them relatively small.
I don’t sell winners — staying the course and being patient.
I invest for at least 5 years — to give compounding time to work.

Each month, I review fundamentals and valuations to decide what to buy—but when and how much is already pre-set. I also follow a strict maximum amount I’m allowed to add to a single investment.

Why this works for me:

✅ It caps how much I can put into any single stock.
✅ It forces me to invest even when panic is in the air.
✅ It spreads out my risk over time, avoiding the “all-in” trap.
✅ Most importantly—it keeps me invested through thick and thin.

It’s not the only way to invest. But it’s a system that works for me—and one you can adapt to make your own. And having a personal playbook like this can be the difference between reaction and resilience.

A structured approach can help avoid emotional overreaction. It doesn't matter what exact number you use. What matters is to define a plan and stick to it. In investing, consistency wins the game.

📓 Write before you act

Before making any changes to your portfolio, write it down.

Why do you invest?
What is your time horizon?
What is your investment philosophy?
Why are you bullish about this investment?
Is there something that would break your thesis?

Success comes with homework and preparation. These are not questions you want to answer after the fact.

Adam Smith puts it perfectly in The Money Game:

“If you don’t know who you are, the stock market is an expensive place to find out.”

Keeping a simple investment journal (even using a simple note app) can help you recognize patterns, curb impulsive trades, and stick to your principles.

🛌 Sleep on it

Feel like you must act after a red day? Pause.

If your decision can’t wait 24 hours, it’s probably driven by fear or greed—not fundamentals. To quote Lynch one more time:

“The trick is not to trust your gut feelings, but to discipline yourself to ignore them.”

5. 🔍 How to find opportunities

Every bear market plants the seeds of the next bull run.

The question is—will you be ready?

This is when great businesses go on sale. Emotions rise. Prices drop.

And that’s when long-term investors quietly do their best work.

🧠 Start with quality. Focus on companies with strong fundamentals—healthy unit economics, expanding free cash flow, and durable moats. These are the businesses that can thrive, not just survive.
📉 Don’t rush in. Deploying capital gradually—especially during volatile stretches—can help you avoid catching a falling knife. You can invest more as markets fall further, not all at once. Use the regret-minimization framework.
🧾 Revisit your watchlist. The stocks you wished you owned at lower prices? They're back. Look for businesses that are still executing, gaining share, or investing through the downturn.
🔎 Focus on long-term payoff. Channel the power law (or 80/20 rule): Aim for the rare few companies that could outperform everything else in your portfolio combined. All stocks are cheap in a bear market, so it’s a great time to invest in companies that tend to be overpriced in a bull market.
🧱 Build your positions slowly. Bear markets often come in waves. That means you’ll likely have more than one good entry point. Create a rule-based approach (e.g., fixed monthly investing or valuation triggers) to stay consistent.

Bear markets test your conviction—but they also reward your preparation.

If you know what you’re looking for, this could be your moment.

6. ✅ Key takeaways for investors

A bear market feels like chaos.

But for long-term investors, it can be a gift in disguise.

The late Charlie Munger encapsulates it all in a single sentence:

“If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder.”

Survival isn’t about brilliance. It’s about behavior.

Here’s your survival checklist:

✅ Zoom out. Bear markets are temporary. History shows they happen every few years—and eventually give way to recoveries. The pain is short-term. The rewards are long-term.
✅ Stay calm. Market cycles are emotional roller coasters. But investing success comes from discipline, not reaction. You don’t need perfect timing—you need staying power.
✅ Have a plan. Whether you automate your investing, deploy cash gradually, or stick to monthly contributions, the key is to remove guesswork. Let the rules carry you in good and bad markets.
✅ Focus on resilience. Look for businesses that can endure and adapt—with strong balance sheets, loyal customers, and long growth runways. These are the companies that come out stronger on the other side.
✅ Buy selectively. When valuations compress, future returns expand. Bear markets offer rare chances to build positions in high-quality names—often at decades-low prices.
✅ Be patient. The best opportunities won’t feel obvious at first. But compounding happens quietly. What matters isn’t the next few months—it’s the next few years.

When others panic, staying grounded is your edge.

Bear markets don’t break great investors—they build them.

If this helped you stay calm, share it with someone who needs it today.

This too shall pass.

That’s it for today!

Stay healthy and invest on.

If thoughtful, long-term investing resonates with you, join App Economy Portfolio, our investing community, and get instant access to our curated stock portfolio.

Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or the views of any other organization.

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