Should You Still Invest if a Bear Market Is Coming? History Offers a Clear Answer.

Investors often focus on picking stocks for maximum returns, but it's their actions during falling markets that truly matter. Watching prices drop and selling is common, but this behavior leads to locked-in losses and missed recoveries. Sticking to regular investments can improve long-term returns.

In the United States' recent recessions, bear markets provided opportunities. Falling stock and bond prices created significant bargains. For instance, long-term Treasuries haven't recovered, but the S&P 500 has experienced several years of double-digit returns. Despite stocks dropping more than 25%, disciplined investors who continued buying picked up shares at substantial discounts as the AI boom approached.

The COVID-19 pandemic caused severe stock price declines, but once the stimulus package was announced, the S&P 500 returned to all-time highs within months. The 2008 financial crisis was the deepest and longest of these bear markets, testing investors' discipline as the S&P 500 lost nearly 60% and didn't hit a new high for four years. However, shares of big banks dropped to just a couple of dollars, presenting a great buying opportunity for those who kept investing.

While the timing of bear markets remains unknown, history shows that the S&P 500 recovers and reaches new all-time highs. Those who demonstrate discipline and continue investing regularly can enhance their portfolio's long-term returns. The Motley Fool offers services to help investors make better decisions.