A Bear Market Is Coming at Some Point. History Says That's Actually Good News for Investors.

The S&P 500 index (SNPINDEX: ^GSPC) has been on an incredible run. After 24%, 23%, and 16% gains in 2023, 2024, and 2025, respectively, the closely watched benchmark is up 11% in 2026 (as of Sept. 10). Investors aren't going to complain about four straight years of double-digit returns.

However, the market is always ready to test investors. There's always a chance that a downturn is right around the corner, and the worst part is that it can arrive without any warning. A bear market is coming at some point. Don't worry, though.

History says that's actually good news for investors.

Image source: Getty Images.

Bear markets occur more often than you might think

When the S&P 500 index seems to continue to reach new all-time highs with each passing day, it can be challenging for investors to think about any downside scenarios. However, the best investors understand that the volatility is normal. It's nothing to be scared of.

That being said, you might be surprised to learn that bear markets aren't that rare. According to research from Fidelity, they've occurred roughly every six years on average over the past 150 years. That's more common than you might imagine.

The last bear market happened in 2022, when the S&P 500 index dipped 20% over the first half of the year. At that time, investors were worried about surging inflation and rapidly rising interest rates. It wasn't long until the market came roaring back.

A bear market generally means that the valuations of some of your favorite stocks can come down. Investors looking to allocate capital at more compelling entry points will welcome this situation.

However, it's not easy on your mental state and psychology. While investors always say they prefer down markets before buying stocks, it's much more difficult when living through these adverse scenarios. There is no shortage of negative headlines about the direction of the stock market and economy that can discourage even the most optimistic investors.

What investors should be doing

Two things can be true at the same time. A bear market is definitely coming at some point. History says this is a fact. On the other hand, no one has any clue when it will happen. The exact timing is the unknown variable.

Either way, there is certainly a group of investors out there who believe one might be on the horizon sooner rather than later. If this sounds like you, then it's crucial to take some important steps to be prepared for a potential bear market.

The first step is to start building a cash reserve. This action assumes that you're already moving savings to your investment portfolio. But instead of allocating this capital to stocks, let the cash balance increase. This gives you the financial firepower to act aggressively when company valuations come down.

Another step is to create a list of stocks you'd buy if they became more attractively priced. Finding high-quality businesses isn't the most difficult thing to do. However, it's not often that these stocks trade at cheap valuations. It's critical to know what companies are on your wish list, so you can buy them when the opportunity arises.

The next piece of advice relates to investor mindset. If you do end up buying your favorite stocks during a bear market, don't just assume that their share prices will immediately start to recover. The market doesn't work like this.

It's probable that stock prices will continue to fall even after you've added these businesses to your portfolio. It's impossible to time the dip correctly. Keep this in mind.

Most importantly, don't ever lose sight of the big picture. This means maintaining a long-term mentality when it comes to your equity portfolio. Real wealth can be achieved in the stock market by being patient and disciplined, while letting compounding do the work.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.