A Bear Market Is Coming -- We Just Don't Know When. Here's What History Says You Must Do to Get Through It Relatively Unscathed.

Key Points

• Statistically speaking, we’re due for a bear market.
• When that day comes, you will want a diversified portfolio to fall back on.
• Those who flee the market during severe downturns miss out on the opportunity to profit as it rebounds.
• These 10 stocks could mint the next wave of millionaires ›

On average, the U.S. experiences a bear market every three and a half years. October marks four years since the 2022 bear market ended, when the S&P 500 (SNPINDEX: ^GSPC) declined by roughly 25%. In other words, we're due.

To be clear, that three-and-a-half-year number is just an average, and no one can fully predict when the next bear market will arrive. And when you look at the year-to-date returns of companies like Sandisk, Moderna, or Dell Technologies, it's hard to imagine a bear market coming anytime soon.

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And yet it will. Bear markets are essential for more realistic asset repricing and for setting the stage for the next period of growth.

Lessons from history

While it's uncertain when the next bear market will arrive, history is clear about what happens when it does and how you, as an investor, can get through it with minimal long-term damage to your portfolio.

Don't lock in losses

Throughout history, investors who stayed invested through bear markets have gone on to recoup losses and often earn impressive gains as the market recovers. On the other hand, those who sell after large declines risk locking in their losses and missing the dramatic rebounds that often take place early in a new bull market.

Keep buying

A bear market is no time to stop buying. History shows that continuing to invest, particularly via dollar-cost averaging, transforms falling prices into an opportunity to accumulate more shares of high-quality holdings at a lower cost. The investors who get ahead are those who keep buying broadly diversified assets -- even when the headlines are dismal.

Remain diversified

Bear markets hit various sectors differently, so it's especially important to stay diversified across asset classes, regions, and industries. A well-diversified portfolio can reduce the impact of any single decline.

Maintain a cash cushion

If you depend on your investment account to fund everyday living expenses, build a large enough cash cushion to draw from throughout the bear market. That's because investors who need to fund living expenses directly from volatile assets are more likely to sell at the worst possible time. The goal is to keep a cash cushion large enough to leave your long-term investments untouched during a market downturn.

While you may not know when the next bear market will strike, these simple steps can help you make the most of it: Build a diversified portfolio, keep investing through market downturns, and give markets enough time to recover. Because no matter how bad a bear market may feel, history shows that it will recover.

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Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moderna. The Motley Fool has a disclosure policy.