When the Next Bear Market Arrives, History Says to Avoid This 1 Costly Mistake

A bear market happens when a major index (usually the S&P 500 (SNPINDEX: ^GSPC)) falls 20% or more from recent highs. Sometimes signs point to a bear market in advance, but no one can predict when one will actually happen. That said, they are a natural part of the stock market cycle, so it's a matter of when, not if.

When the next bear market arrives -- whether it's in weeks, months, or years -- one thing investors should avoid is trying to time the market. It's much easier said than done, no doubt, but history shows how costly this mistake can be.

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It only takes a couple of misses

Not investing or taking your money out of the market while prices are falling in a bear market sounds reasonable on the surface. The problem is that you can't predict when the market will hit its bottom and bounce back, causing you to miss some of the market's best days. This takes a real toll on your returns over time.

For perspective, let's assume you invested $10,000 in an S&P 500 ETF in 1995 and let it sit through 2025. Without touching it, you would've averaged 10.3% annual total returns, and you'd have around $192,100 today.

If you'd missed 10 of the S&P 500's best days, your average returns would drop to 7.4%, and your investment would now be about $85,400. Missing 20 of the best days means 5.4% average returns with a $49,500 investment value, and missing 60 of the best days -- out of over 7,500 trading days in those 30 years -- would mean losing money.

It's common for investors to miss out on the market's best days by trying to avoid its worst days. Seven of the S&P 500's best days in the past 30 years happened during the financial crisis; six happened during the COVID-19 pandemic; and its third-best day in 30 years (in which it rose 9.5%) came during 2025's tariff fiasco.

Trust the S&P 500's resilience

When in doubt, an S&P 500 ETF like the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) is one of the best investments to hold and add to during a bear market.

SPY holds companies from all major sectors (including virtually all blue chip stocks), grows with the U.S. economy over time, is relatively cheap (0.09% expense ratio), and has bounced back from every bear market it has faced since it began trading in January 1993.

Whether it was the 49% drop during the 2000 dot-com bubble, the 56% drop during the 2008-09 financial crisis, or the 2022 bear market, which wiped out a quarter of its value, it recovered and reached new highs.

Those are just a few recent examples. The S&P 500 has experienced 27 bear markets and is now up a good bit from each one. Past results don't guarantee future performance, and the recovery times vary, but betting on SPY (and the S&P 500 as a whole) to continue earning is one of the surest bets you can make in the market.

Stefon Walters 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.