A bear market is when securities prices suffer a 20% decline from recent highs.The term describes a generally hostile environment for certain assets in which investors hold a negative outlook on the market.
It's not clear how the term was born, but investors tend to refer to a hostile or declining market as a bear market and a favorable or rising market as a bull market.
Both bull and bear markets are part of the natural movements of markets. No assets move consistently in only one direction.
Bear markets are relatively common, happening at a pace of once every three or four years on average based on U.S. stock market history. There have been a total of 28 bear markets for U.S. stocks since 1928.
The duration of a bear market depends on the circumstances of the marketplace. Of all the bear markets for U.S. stocks since 1928, the average bear market lasted 289 days.
Even the best investors on the planet cannot accurately predict a bear market. Even if you have a rare talent for analyzing market dynamics, the reality of investing is that unexpected news and unplanned crises are always possible.
A popular refrain among active investors is that there's always a bull market somewhere. In other words, even in the toughest times, there tends to be a short list of investments that manage to go up when everything else is going down.
That's always easier said than done, however. Even so-called safe-haven assets are not a guarantee. Back in the 2008 financial crisis, asset classes including hedge funds, U.S. Treasury bonds and gold did well.