Wednesday's Word: Bear Market

By Abigail Howd, Spring 2018 IAC Student Intern
A bear market is a prolonged period when investment prices continuously drop. According to FINRA, bear markets are often “accompanied by economic recession, rising inflation, or rising interest rates.” A decline of at least 20% in the market index usually indicates we are a bear market. To date, the longest bear market in United States history happened during the Great Depression when stock and bond prices dropped for four consecutive years!
Bear markets often lead to graveyard markets which refer to an overall decline of new investments. This decline occurs for two reasons. The first is that investors who already own holdings would lose large sums of money trying to liquidate their declining investments. The second is that potential investors are hesitant to invest at all during a bear market.
Regardless of what kind of market we are in, it is always important for investors know what is happening in their portfolios. Seeing your investments drop is a scary thing, but one of the worst things you can do during a bear market is to ignore your investment accounts. Not regularly checking in on your account can allow errors or fraud to go by unnoticed and result in even greater losses than if they were caught sooner by a diligent investor.
FINRA provides the following tips to investors, regardless of the current market: (1) verify your account activity, (2) confirm and/or update basic account information, (3) compare any trades made in your account with the trade confirmations you received, and (4) review any charges or fees disclosed on your statement.
Don’t be afraid to ask your broker questions about any charges or activity in your account that you don’t understand. If you stay in-the-know about your account, you have a better chance of protecting your financial future.