As I’m writing this, on the first day of May, the S&P 500 is down about 8.5% from its high reached in late February.
If you go back a few more months to the start of 2025, the U.S. stock market is down a modest 4.5%.
And not to burst any alarmists’ bubbles out there, but even with this recent downswing, the market is still up over 12% over the past year.
What I wanted to highlight here is that despite what you may be hearing on the news or your social media feed, the stock market is not in a dire place currently.
Corrections of 10% or more in the S&P 500 have occurred in 63% of all years dating back to 1928. Meaning that over the last 97 years, there has been a double-digit correction at some point during the year more often than not.
But let’s say, for the sake of this post, that people’s worst fears come to fruition and the market drops much lower than where it is right now, and we head into bear market territory.
Whenever people start to see their account balances go down, I hear things like:
“I saved a ton of money but the market basically wiped it out.”
“My entire year’s worth of savings just disappeared.”
“I would have been better off not investing money at all this year.”
“I have to stop investing until things get better.”
This line of thinking comes from judging your investments based solely on the current balance of your account.
Let’s say you have an investment account currently valued at $100,000. You then decide to invest an additional $5,000. You let a couple of weeks go by and then check back in on your account, expecting it to be worth at least $105,000. But to your dismay, you find your account balance has dropped to $95,000. What!?
This might cause you to think:
“Wait a second, I put in $5,000 and not only did I lose all of that money but now I have less than what I started with?? The stock market sucks!”
For many, the stock market feels like a straightforward bet. I throw my money in, and if the market goes up, that’s great, and if it goes down, then that’s bad, and I lose money.
If you’ve ever woken up, looked at your investment account, and felt frustrated or angry at the stock market, try changing your focus from your daily account value to shares of assets you’re collecting over time.
Investing is the business of accumulating assets. In the stock market, this means accumulating shares of stock.
For some reason, this concept is easier to grasp with other tangible asset classes like real estate, a private business, or maybe even something like gold bars. A real estate investor’s goal will be to buy five rental properties, or a business owner’s priority will be to expand their business to three locations, regardless of how much those assets cost to purchase along the way. Their goal is to simply obtain as many assets as they can manage, because more assets mean a higher potential return down the road.
The same principle should apply to investing in the stock market. When you invest, you’re buying thousands of shares of actual businesses. Physical businesses that have real people working for them. Stocks aren’t just abstract bets, they’re actual productive assets that generate profits, reinvest capital, and pay dividends.
You own something that has a promise of future income and appreciation.
And whatever your current account balance, you don’t lose any of your shares if the market happens to go down.
If your house all of a sudden dropped 10% in value this year, would you want to sell it? Of course not. You may not even know the value decreased. Yet, because our investment account balances are so easily visible, it makes it easier to panic at any price movements. That transparency doesn’t make stocks any more dangerous than other asset classes, it just makes them more honest.
It’s incorrect to think about your money being “lost” just because the current price of your assets are down.
At the beginning of 2022, the U.S. stock market took a 23% tumble and didn’t make it back to breakeven until the beginning of 2024. Many people would look at that and say, “That’s two wasted years where I didn’t make any money in the stock market.”
Well, not quite.
To use a very over-simplified example, let’s say you owned 200 shares of an S&P 500 index fund at $500 a share, putting your account balance at $100,000. Then over the next two years, the index fund price went from $500 down to $385 and then back up to $500. During those two years, you also bought an additional share each month.
Are you in the same spot you were two years ago?
No, you now own 224 shares of an S&P 500 index fund instead of 200. You grew the amount of assets you own. Your account balance is now $112,000, not $100,00. Additionally, you now have more shares to grow with the market as it continues to climb.
Following those 2 years, the S&P 500 grew another 30% over the next year. In this hypothetical scenario, those 224 shares of stock would have grown to be worth $145,600 instead of $130,000 had you not bought any additional shares.
The key is to keep buying.
Sometimes the price of stocks will be more expensive, and other times the price of stocks will be cheaper, but the game is to keep accumulating as many as possible.
When you view investing from an asset accumulation lens, every market drop is an opportunity. You get to buy more shares now because they’re priced at a discount. And the more shares you can buy, the faster you can reach financial independence.
That is how you make money during a bear market.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.