The expression rings especially true during the rocky markets investors have endured this year. The benchmark S&P 500 stock index closed in bear market territory Monday, down more than 20% from its January peak.

When the market starts dropping, it’s important not to take any drastic actions. The best thing most investors can do is stay the course.

“The most important thing is don’t panic, and don’t panic sell,” says Douglas Boneparth, certified financial planner and president of Bone Fide Wealth.

First, novice investors (and even people who have been investing for decades) should take a minute to understand what a bear market is, and how it could impact already heightened anxieties. 

What is a bear market?

A bear market is defined as a 20% drop from a major stock index’s peak. Those indices can include the S&P 500, the NASDAQ, and others.

Just like seeing a bear in your living room, a bear market can cause panic—although it’s not as scary as it seems. Think of it more as a slight, though initially alarming, change from the norm.

A bear market means usually means something is being adjusted in the market, says Keith Heritage, investment advisor and managing partner of Heritage Financial. These dips aren’t permanent, and any investor who’s been at it for a while has likely experienced a few.

The current dip is the result, in part, of surging inflation and fears that a recession is imminent. U.S. consumer prices rose 8.6% year-over-year in May, according to the most recent government data, the fastest price increases in 40 years.

While bear markets can be associated with recessions, or periods of prolonged economic decline, it’s not always a sign of a longer-term downturn. Most recently, the U.S. entered a bear market at the start of COVID-19 in March 2020, as investors were panicking about the pandemic. A recovery soon followed.

But bear markets can push investors toward risk-aversion and fear, which is why it’s important to stay above the fray during these declines.

“I’ve always said to people, it’s never as bad as you think and it’s never as good as you think, no matter what the market is doing,” says Heritage. 

How to navigate a bear market

When the market falls—and with it the value of your portfolio—one of the most important things any investor can do is remember why they’re investing at all. For most, it’s to build long-term wealth for retirement.

“If you don’t know why, or [don’t] have a plan, this is an opportunity to go get it,” says Boneparth, “People who don’t have much of a set financial plan might become more nervous during a bear market.”

Those who have more structured goals may be able to better manage their emotions than those who do not, he argues.

And while younger investors might be particularly worried due to a lack of experience, a bear market is actually an opportunity for them to buy stocks at a discount, financial advisors say. On the other hand, investors near or in retirement, or who plan to take an allocation in the next few years for another goal, should be the most concerned.

“If you have some kind of need for money within the next year, it should be set aside already and not be exposed to being in the market,” says Heritage. “But if you’re not necessarily needing the money in the next year, sometimes it’s a nice opportunity to buy more stocks.” 

A bear market drives home why it’s so important to have a diversified portfolio that’s value is not dependent on a handful of investments.

“This is really a good time to look at your portfolio and say, ‘Was I really diversified?,’” says Steve Azoury, financial advisor and owner of Azoury Financial.

Azoury likens a non-diverse portfolio to “a baseball player, one minute he’s hitting 50 home runs. And the next day, you can’t hit the curveball. Well, then he’s in the minor league.”

To extend the baseball metaphor: Don’t place all of your bets on the one player—or stock—who’s having a stand-out season. Bet on multiple players across the field who consistently do well year over year.

If you already have a diverse portfolio, you don’t need to overhaul your plans. “You don’t need to get fancy, or sexy when it comes to navigating bear markets,” says Boneparth.

Across the board, the advisors say that it’s essential to remain level headed in this stressful time. “It’s just really important you don’t make emotional responses to the markets going down, try to make objective responses,” adds Heritage.

That might mean logging off Twitter or Reddit when you start getting nervous. Though social media can be a gift—unlike the recession in 2008, we have access to more information to educate ourselves—it can also play on our emotions in the worst ways. 

“The amount of information, even disinformation that’s bombarding you on a daily basis is far greater today than 13 years ago,” says Boneparth. It might be best to check your accounts in moderation.

Boneparth cautions against panic selling and says that “the people selling now will probably regret [it in] three to four months. They got out low.”

Indeed, according to a MagnifyMoney survey, about 38% of investors pulled money during the past year. About 40% of them regret that decision.

“Everybody thinks the world is coming to an end—maybe just take a breath,” says Heritage.

This article was updated to reflect the market on June 13, 2022.