Stock Market Corrections, Crashes, and Bear & Secular Bear Markets: The Differences and How to Handle for Long Term Financial Health

Stock market corrections, crashes, bear markets and even secular bear markets are a reality of long term investing. They have happened before and will happen again (March 2025, for example.

What Are the Differences Between a Crash, a Correction, and a Bear Market?

The difference between a crash, correction, and bear market lies in the severity, duration, and underlying causes of a market decline. Here are the definitions:

Market Crash: A market crash is a sudden, extreme drop in stock prices, typically 10% or more in a single day or a few days. Crashes are often driven by panic selling, economic shocks, or major financial crises (e.g., the 1987 Black Monday crash, 2008 financial crisis).

Market Correction: A market correction is a decline of 10% to 20% from a recent high, occurring over weeks or months. Corrections are common and can be a natural part of market cycles, often serving to reset overvalued stocks before potential recovery.

Bear Market: A bear market is a prolonged market decline of 20% or more from recent highs, lasting several months or even years. Bear markets reflect sustained pessimism and economic downturns, often linked to recessions (e.g., the dot-com crash of 2000-2002 or the 2008 recession).

A special note on secular bear and bull markets

A secular market is a long-term trend in the financial markets that lasts a decade or more, driven by fundamental economic factors such as productivity growth, demographics, and technological innovation. Secular markets can be bullish or bearish:

• Secular Bull Market: A prolonged period where stock prices trend upward over many years, even though short-term corrections and bear markets may occur within it. Example: The 1980s–1990s bull market, fueled by technological advancements and economic expansion.
• Secular Bear Market: A long period where stock prices trend downward or remain stagnant, despite temporary rallies. Example: The 1970s bear market, marked by high inflation and slow economic growth.

Secular markets reflect deep-rooted economic shifts rather than short-term fluctuations, making them essential to consider in long-term investment strategies.

What Are Boldin Subscribers Doing with this Week’s Recent Downturn?

A survey on the Boldin Facebook group this week revealed that most Boldin subscribers are fairly unfazed by the recent market correction with 38% of respondents saying they’ve “seen this before.” And, the comments on the poll mostly underscore that Boldin users know that down markets are a normal part of investing. That being said, 16% say that they are “worried,” 19% are “paying attention” 10% are “sitting tight,” 6% are buying, and 7% are angry.

No matter how you feel, here are 14 tips for weathering these investment storms:

1. Remain Calm

Watching the stock market lose value is not fun. However, don’t panic.

Historically, those who remain calm and stay the course with their investments are rewarded with a big bounce in due course.

Unfortunately, many retail investors (regular people who invest their money themselves) get nervous as prices trend downward. It is not uncommon to hear stories of people getting nervous and selling at the market bottom and then not re-investing, missing the market recovery.  This is the single biggest reason that retail investors typically lag overall market performance.

We can not predict what will happen, but acting calmly is bound to serve you well.  Do not panic is the first rule of protecting your long term financial health in a downward trending market.

2. Worried that We Are Facing a Secular Market? Practice Patience!

A secular bear market can last years. So, it is crucial to adapt a truly long term mindset. Those who invest wisely and remain patient often emerge stronger when markets turn bullish again. If settling in for the long term, you’ll want to:

• Prioritize capital preservation and reduce exposure to highly speculative or volatile assets and be sure to hold adequate cash reserves.
• Consider defensive investments. Sectors that perform well in downturns are consumer staples, utilities, and healthcare. Bonds and fixed income assets are another option.
• If you are still working, keep saving and investing regularly.

3. Understand that Bear Markets, Crashes and Corrections Are Normal

According to Investopedia, between 1980 and 2018, the U.S. markets experienced 36 corrections.

• Ten of these corrections resulted in bear markets, indicating an economic downturn.
• The other 26 remained or transitioned back into bull markets reflecting economic growth and stability.

The average market correction is actually pretty short-lived lasting anywhere between three and four months.

According to data, of the past 20 corrections, only two lasted longer than 100 trading sessions. The longest recent stretch in correction territory was a period of 229 trading days that ended in 1978.

4. Repeat After Me: If You Don’t Sell, You Don’t Lose Actual Money

If you owned $100,000 of a stock index during a 20% correction, you might say that you lost $20,000. This might feel awful.

However, it is important to remember that if you don’t sell, you only actually lose that money on paper. Don’t focus on the virtual losses, consider what you stand to gain if you can stay invested.

5. Invest

The number one rule of stock market investing? Buy low, sell high.

Stock market corrections are a tremendous opportunity to invest money, if you have any available.

6. Invest at Regular Intervals No Matter What the Market is Doing (Dollar Cost Averaging)

Dollar-cost averaging is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions. Instead of trying to time the market, you keep buying—whether prices are up or down—so that over time, you accumulate assets at an average cost rather than making a single risky purchase at a high price.

Although lump-sum investing often yields higher returns due to immediate market exposure, dollar-cost averaging remains a valuable strategy for those seeking to minimize risk and avoid the pitfalls of market timing.

Unless you have a working crystal ball and can time the bottom, it is far safer to just invest regularly – especially as the market trends downward.

7. A Correction Can Be a Good Time for a Roth Conversion

A Roth Conversion is when you transfer money from a traditional IRA or 401k to a Roth IRA. When you do this, you pay income taxes on the amount you convert. However, once those assets are in the Roth, they grow tax free, and you do not pay taxes on the withdrawals you make in retirement.

So, doing the conversion when the value of your portfolio is down and you think there is potential for long term growth can be a great idea.

A few things to keep in mind:

1) A Roth conversion is a permanent move.

2) You’ll want to consider if the conversion will raise your Medicare Part B and Part D premiums in future years.

3) Be sure you are careful to follow all conversion rules and reinvest while market is down.

4) Most importantly, make sure you have the money available to pay the taxes owed on the conversion. Ideally not from the account you are converting which reduces the efficiency of a conversion.

It is easy for you to model different Roth conversion amounts in the Boldin Retirement Planner. PlannerPlus users can:

• Model conversions at different amounts.
• Immediately see the difference in your lifetime tax burden.
• Analyze how it changes tax brackets and more.
• Boldin Retirement PlannerPlus subscribers can use the Roth conversion explorer to get a personalized strategy for doing conversions to maximize your estate value at longevity.

Learn more about Roth Conversions.

8. Remember that Even Cash Can Be a Risky “Investment” (Especially Now)

In an inflationary period, the value of cash goes down. A dollar buys less and less with every passing year.

On the other hand, stocks and stock markets generally trend upward.

Cash — whether it is buried in your mattress or sitting in your checking account — is usually a terrible way to hold money, especially money that you are saving for long term goals like retirement.

Imagine that you have $50,000 that you do not need to spend for 25 years.

• If you keep that money in cash. You will still have $50,000 in 2042 (25 years from now)
• That $50,000 will likely buy much less than it can now.
• If you put the money in a checking account, you might earn 3% on your money. But, with inflation at around 8%, your real returns would be negative 5%.
• However, if you invested your money and earned a conservative 6% rate of return and assuming inflation goes lower, you would have: $223,000 — more than four times the amount you started with!

9. Understand Ways to Bridge Your Finances if You Experience a Loss

If you experience losses in retirement investments, you are not necessarily in the poor house, especially if you consider alternate sources of wealth before selling stocks that are down.

Here are some of the best and worst sources of emergency money.

10. Again, Remain Calm: Avoid Panic Selling

Panic selling is when you get so worried that a market correction is going to continue that you quickly sell. This can be disastrous. Not only are you selling at a low point, but you are likely to miss out on big gains when the market bounces back.

11. Mix it Up

When the entire market goes down, one strategy that can pay off big is to improve the mix of stocks you own.

Perhaps you own some “lower-quality” stocks or funds, you could potentially sell those holdings and buy into companies of higher quality and better long term prospects.

Look to sell companies with high fixed costs or lots of debt and buy stocks with high levels of growth, cash-rich balance sheets and good returns.

Of course, you need may some expertise to do this effectively.

Warren Buffet once said:

“What an investor needs is the ability to correctly evaluate selected businesses. You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

It is a good idea to know something about the companies whose stock you own and to really believe in them. You will be less likely to panic and sell in a major downturn if you actually understand what the company does and know enough about the industry to project whether or not there will be a market for whatever the company makes in the future.

Don’t have the expertise yourself? Talk with a certified financial advisor.

12. Be Ready for the Recovery!

You might be surprised to learn that the stock market’s best trading days typically occur within two weeks of its worst days.

13. Understand that Long Term Investors Have Always Prospered

Yes. The stock markets go down. However, looking at the historic trajectory of the markets, things have only gone up over the long haul.

The reason that retirees get nervous is that not everyone can have a long-term perspective. In retirement, you might need to withdraw money for living expenses this month, this year or within the next five years.

Money you will need in a relatively short time period should probably never be invested in the stock markets. However, money that you will use in the future can be invested in stock markets — just preferably not individual stocks which do have significant risks. Index funds can sometimes be a good way for retirees to enjoy growth for their longer-term assets.

14. Be Prepared

You’ve heard it before, proper preparation prevents poor performance. The adage is particularly true when it comes to your financial health. Here are tips for preparing for a down market:

Know what money you will need and when

If you are considering stock investments, you need to think hard about how much money you need and when and make sure those funds will be available to you — no matter what the markets are doing at that time. The Boldin Retirement Planner lets you see this in great detail.

Try a bucket approach

The bucket approach is advocated by many retirement experts.

• In one bucket you maintain liquid assets — cash or other low risk investments in an amount to fund 1-3 years-worth of your retirement withdrawal needs. The reason for this bucket is to avoid the need to liquidate equities during periods when the stock market is down, realizing steep losses.
• The second bucket might contain up to five years-worth of living expenses and be invested in a combination of income producing investments and some that offer moderate growth opportunities.
• The third and most aggressive bucket will be predominately invested in stocks and more aggressive fixed and alternative type of investments. This bucket is designed for growth and to help you avoid running out of money by being too conservative.

The actual percentage allocation to each bucket will vary by household and how much you need and want to spend over what time period.

The Boldin Retirement Planner helps you figure out how much savings you need in different buckets.  This award winning tool can also help you visualize what your retirement budget will be, how much income you will rely on from savings and investments over the course of your retirement and much more.

Prepare by diversifying

Many people think that you should avoid the stock market with money intended for retirement. This is not usually the best strategy.  Stocks can do a good job of helping your income and assets grow and stay ahead of inflation.

However, you don’t want to “keep all of your eggs in one basket.” You want to figure out a diversified portfolio of an array of financial vehicles.

Consider bonds, cash, real estate, derivatives, life insurance, annuities, precious metals and other types of investments.

You also want diversified holdings within each asset class.  For example, for stocks you would not want only large oil and gas companies.  Instead, you might want a mix of small and large, international and domestic companies in different fields.

Not sure about the right mix of investments for your needs?  Consider working with a pre-screened and fee only fiduciary financial advisor. Schedule a free discovery session with a Certified Financial Planner (CFP)® from Boldin Advisors.

Consider Index Funds

If you want to be invested in the stock markets, consider index funds to give you broad exposure to the markets and not individual stocks which are much riskier.

Believe in the fundamentals of the companies you own

Warren Buffet is famous for saying: “What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

It is a good idea to know something about the companies whose stock you own and to really believe in them.  You will be less likely to panic and sell in a major downturn if you actually understand what the company does and know enough about the industry to project whether or not there will be a market for whatever the company makes in the future.

Guarantee the income you really need

Annuities can be a great way for those in or near retirement to stabilize a portion of their income. Some feel this is another leg on the retirement income stool along with Social Security, pensions and your various investment accounts.

You probably don’t want all of your savings in an annuity. However, you might want to consider purchasing an annuity to guarantee income that you could not live without.

• If you are considering any annuity you really need to shop around. Beyond what is offered by those actively trying to sell you an annuity, look at low cost, no-load options like those offered by Vanguard and others.
• It is appropriate to ask how much you would receive in monthly income from several carriers and compare the answers. You will find that the payments may differ widely for the same annutization option.
• Another key question is how much of your nest egg do you want to commit to an annuity?

Explore more of the pros and cons of annuities or get an instant annuity estimate.  Find out how much income you could buy and see various options.

You might also want to explore other ways to produce retirement income.

No matter what happens, create and maintain a detailed overall retirement plan

You’ll be much better off in a market downturn if you have already created a highly detailed and completely personalized retirement plan that can easily be updated when things change.

If you have a plan that is easy to update, then during a crash you can quickly run different scenarios and really assess the impact to your near and long term financial health.

The Boldin Retirement Planner is one of the the most comprehensive and powerful tools available.  Forbes Magazine calls the system “a new approach to retirement planning” and it was rated the Best Financial Planning Software in 2025 by BankRate.