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What is a Bear Market?

A bear market refers to a widespread decline in asset prices of at least 20% from recent highs. During a bear market, the stock market declines, and assets become less valuable. This is different from market corrections, when prices fall at least 10%—these are usually temporary. The nature of a bear market is longer. In bear markets, stocks (particularly small cap stocks or those with small market capitalizations) can experience increased volatility or drastic price changes due to lower trading volume.

Bear markets are just 25 months (around 2 years) long in average, compared to an average length of 59 months (nearly 5 years) for bull markets

Characteristics of a bear market:

  1. Declining economy

  2. low business profitability

  3. Negative Investor Sentiment

  4. Declining Stock Values

Strategies to survive a bear market:

  1. Dollar Cost Average

  2. Diversify your portfolio

  3. Utilize put options

  4. Search for yield

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