What is a bear market?

An index peaks at 5,000 points and falls to 3,750 over the next eight months, a 25% drop, so it is in a bear market. A $50,000 portfolio that tracked it would fall to about $37,500.

To get back to $50,000 it needs to rise about 33%, because the gain is measured on the smaller amount. A fall of 10% to 20% is usually known as a correction rather than a bear market.

JagSim's prices are real-time, so you can practice through falling markets as they happen, with $100,000 of virtual money and nothing real at risk. A stop order can set your exit ahead of time. On Pro, the stress test on the Research page shows the largest daily loss and the largest 5-day loss your current holdings would have had over the past year, and Portfolio shows your max drawdown. JagSim has no short selling, so you cannot profit from a fall there: you can sell what you hold or keep cash.

What is the difference between a correction and a bear market?

A correction is a fall of about 10% to 20% from a high. A bear market is a fall of 20% or more.

How do investors react to a bear market?

Some sell to limit losses, some hold and wait, and some keep buying at lower prices. Others sell short, betting on further falls, which can lose more than they started with. None of these is right for everyone.

What is a bear market rally?

A sharp rise inside a longer fall, which can fade back to new lows.

Is a recession the same as a bear market?

No. A recession is a fall in economic activity. Stock markets often fall before or during one, but a bear market can happen without a recession.