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Entering a textbook bear market
A 20% drawdown from peak is the conventional bear-market threshold. Since 1929, there have been approximately 14 bear markets, occurring roughly once every 5-7 years. Duration and depth vary enormously.
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
The 2020 bear lasted 33 days (fastest ever). The 2007-09 bear lasted 517 days. The dot-com bear lasted 929 days. One number (-20%) masks enormous variation.
Reaching -20% tells you nothing about whether the market will fall to -25% or -50%. The distinction between 'correction' and 'bear' is a media construct, not an analytical tool.
Reinvesting dividends into a declining market buys more shares at lower prices. This 'acceleration effect' means bear markets actually boost long-term terminal wealth for net savers.
Median 3-year annualized return from the -20% threshold is approximately +15% per year. The worse it feels, the better the forward opportunity.
Once a bear market is official, review the sequence of your spending: withdrawals should draw on cash and short-term bonds so depressed equities are never the forced source. Confirm dividend reinvestment stays on, too — reinvested payouts buy more shares at lower prices, which is precisely how bear markets have historically boosted long-term wealth for net savers.