Every few years the news does the same thing: the word "bear" appears in a headline, someone's uncle says he always knew, and a teenager who has just opened a practice portfolio asks whether it is all about to go wrong. It is a fair question, and the honest answer is calmer than the headlines.
This guide explains what a bear market is, how it differs from an ordinary dip, why people tend to behave badly during one, and what a young investor can learn from it without a penny at risk. It is written so a parent and a teenager can read it together. It describes how markets work in general; it says nothing about where any market is heading.
A bear market is a fall of 20% or more in a market or index from its most recent high, usually sustained over weeks or months rather than a few days. A fall of around 10% is called a correction. Bear markets are a normal, recurring part of how markets work. They are painful to live through, but the main danger for most people is not the fall itself; it is what they do in reaction to it.
There is no official body that declares one. The 20% rule is a convention, and it is measured from a recent peak to a later low. If an index peaks at 1,000 and drops to 800, that is a bear market. If it then climbs back to 900 and falls to 850, that is still the same bear market, because the measuring stick is the original high.
The opposite is a bull market, a sustained rise, and the terms are shorthand rather than science. Our guide to what investing is introduces both alongside the basics of what a share actually represents.
| Term | Rough size of the fall | What it tends to feel like |
|---|---|---|
| Pullback | Under about 10% | A bad week; barely a headline |
| Correction | About 10% to under 20% | Uncomfortable; common |
| Bear market | 20% or more from the recent high | Sustained gloom; "is this the end?" conversations |
| Crash | No fixed size; a sharp, fast fall | Panic; speed is the point, not the percentage |
The percentages are conventions, not rules. Different writers draw the lines slightly differently, so treat the table as a guide to the vocabulary rather than a definition you could be marked wrong on.
There is rarely one cause, and the explanation usually arrives after the fact. Common ingredients include a slowdown in the economy, rising interest rates that make borrowing dearer and safer savings more attractive, shocks that nobody priced in, and prices that had run ahead of the underlying business results. Sentiment then feeds on itself: falling prices make people nervous, nervous people sell, and selling pushes prices lower.
It is our view, not a law of nature, that this last part is the most important for a learner. The fundamentals matter, but a good share of any bear market is people reacting to other people reacting. That is why behavioural finance belongs in the same conversation as the economics.
They vary a great deal. As a rough illustration of the range, the S&P 500 fell by about a third in a matter of weeks in early 2020 and then regained its old high within the same year, whereas the 2007 to 2009 bear market took the index down by more than half over about a year and a half, and the recovery took years. These are approximate, widely reported index figures and are included only to show how different two bear markets can be, not to suggest what the next one will do.
What history does not give us is a timetable. Past recoveries are not a guarantee about the future, and nobody can reliably say when a fall will bottom out. Anyone who claims to know is selling something. Our guide to drawdowns and recovery explains why a 50% fall needs a 100% gain to get back to even, which is the sort of arithmetic that makes a deep fall so much more painful than it looks.
The instinct to make the pain stop is human. The trouble is that selling after a fall turns a temporary paper loss into a permanent one, and it can lock in a loss just before a recovery, because the fear is loudest exactly when prices are lowest. This is a behavioural pattern, not a prediction: nobody can say where the bottom is, including the people who sell and the people who do not.
Selling before a fall and buying back before the rise takes two correct guesses in a row. Most people, professionals included, find that very hard to repeat. The honest lesson is humility about timing, not a new method for doing it.
A headline about "the market" is an average. A portfolio concentrated in a few shares can fall further than the index, which is why concentration risk matters more once things turn. The difference between a bumpy ride and a lasting loss is explored in volatility vs risk.
Whether a fall matters depends heavily on when the money is needed. Money needed next year and money not needed for a decade face very different risks, a point covered in our lesson on investment horizon and goals. That is general education, not a view on what any individual should do.
For a young person, a bear market is mostly a vocabulary lesson and a stress test of temperament. It is far better to meet your own instincts for the first time in a practice portfolio than with savings. For a parent, the useful conversation is not "will it crash?" but "what would you do if it fell 20% tomorrow?" Asking that when nothing is at stake tends to produce more honest answers than asking in the middle of a headline storm.
If your family has real money invested anywhere, including in a child's account, this article is general education and not advice about it. Our Junior ISA guide for parents covers the basics of how those accounts work, and decisions about real money are for the adults who own it, ideally with regulated advice.
A virtual portfolio on real prices is a good way to watch a fall in real time without a real loss. You cannot rehearse the emotion perfectly, since virtual money does not sting the same way, but you can rehearse the questions. Did you check the portfolio every hour? Did you want to do something just to feel in control? Did you stick to a reason you wrote down at the start? Our post on how realistic virtual trading is is honest about what practice can and cannot teach, and how teens practise trading safely covers the habits worth building.
The drawdown theme also works as a game format. A "survival round" that scores the smallest fall rather than the biggest gain is one of the challenges in best finance challenges for students.
RIP. is a free iOS app that teaches investing with virtual money on real market prices. Every player starts with $10,000 in virtual cash, there are 88 short lessons that include risk and drawdowns, and you can take on friends in head-to-head stock duels. Because the prices are real, whatever the market does while you play is what your virtual portfolio sees; we make no claim that it will contain a bear market at any given time. No real money is ever involved: nothing to deposit, nothing to cash out. Parents can read all the lessons for free on the Learn hub and check the answers on our safety page.
Nothing here is financial advice or a prediction about any market, share or asset. RIP. is an educational simulation using virtual currency on real prices — a place to practise and learn, never a place to put real money to work, and never intended for under-18s to invest real money.
A bear market is a sustained fall of 20% or more from a recent high in a market or index. It is shorthand for a long stretch of falling prices and gloomy sentiment, and it is a normal part of how markets behave over time.
Size, mainly. A correction is a fall of roughly 10% to just under 20% from a recent high, and a bear market is a fall of 20% or more. Corrections are more common and often shorter, though the lines are conventions rather than strict rules.
It varies widely and nobody can say in advance. Some have been over in weeks and others have lasted well over a year, and past recoveries are not a guarantee of future ones.
You can practise your reactions. A virtual portfolio on real prices lets you watch falls and decide what to do with nothing real at stake, though virtual losses never feel quite the same as real ones, which is worth remembering.
$10,000 in virtual cash on real market prices, head-to-head duels and 88 short lessons. Virtual money only, nothing to deposit. Free on iOS.
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