Key Points
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The S&P 500 index has gained 73% over the past five years, but what goes up must come down.
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If you had invested $1,000 in the Vanguard Morningstar Total Stock Market ETF right before the 2022 bear market, today you’d have $1,676.
The S&P 500 index (SNPINDEX: ^GSPC) is up about 13% year to date, 19% in the past year, and 73% in the past five years. But many investors are wondering when this bull market will come to an end.
Indeed, stock prices don’t go up forever. Something always happens that causes stock markets to go into a downturn. But no matter what happens next in the economy or the stock market, I’m not worried about a bear market in 2026. Even if stocks take a tumble, even if artificial intelligence (AI) turns out to be an overhyped dot-com-style bust, I’m going to keep investing.
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Even if there’s a big 2022-style stock market downturn or a years-long bear market starting in 2026, I’m not worried. Here are a few reasons why.
1. Bear markets mean stocks are on sale
Many younger investors might not have experienced a prolonged downturn in the markets. Try not to overreact when it happens. I’ve lived through a few big booms and busts during my investing lifetime. Even though it feels scary along the way, those lower share prices during bear markets are ultimately “good news” for younger investors who have a long time horizon for their money to grow.
Bear markets offer you a 20% discount (or more) on stocks. Think of it like this: Let’s say you want to invest in a low-cost index fund, like the Vanguard Morningstar Total Stock Market ETF(NYSEMKT: VTI). As of this writing, the market price of this exchange-traded fund (ETF) was about $380 per share. If stocks enter a bear market, it means a decline of at least 20% in share prices. So VTI’s shares would drop to about $304.
Let’s say you use dollar-cost averaging to invest in stocks each month with the same number of dollars per month. If you invest $600 per month, today that dollar amount would buy you about 1.6 shares of VTI (at $380 per share). But during a bear market, when VTI shares are “on sale” for $304, that same $600 investment would buy about two shares of the total stock market fund. The same number of dollars buys you a larger number of shares.
2. Stock prices (so far) always bounce back
Bear markets can be scary. It might feel like the stock market is falling apart, like your life savings will disappear, like no one will ever buy stocks again. But that’s not reality. Stock market history shows us that eventually, the momentum will turn. Investors will start buying stocks to take advantage of those discounted share prices. The market will sort out whether shares are overvalued. New winners get picked, while losing stocks fall away.
The best move to make during a bear market is to just stick with your investing plan and keep buying a diversified portfolio of stocks each month. Along the way, if share prices decline, you’re going to keep “buying the dip” and buying more shares when prices are lower.
3. If you’re a long-term investor, there’s (almost) never a bad time to buy stocks
During a bear market, many investors get tempted to try to time the market. They might say to themselves, “I think the market is overpriced. I think stocks are going lower. I’m going to wait to buy more shares until prices go down another 10%.”
Here’s the problem: No one can predict the future! The stock market might not keep declining. The bear market might hit bottom sooner than you think. Stock prices might recover faster than you think. The market can move faster than you.
Sometimes you can make great returns on investments even if you buy stocks “at the worst time,” like right before a bear market begins. Here’s how much money you’d have today if you had invested $1,000 in the Vanguard Morningstar Total Stock Market ETF right before the bear market of 2022:
VTI Total Return Level data by YCharts
Instead of trying to pick exactly the right moment to buy stocks, just keep investing in a diversified portfolio of stocks. Stick with your plan. Let the market do the work for you.
Why buy VTI anytime — and in a bear market
One of my favorite ETFs is the Vanguard Morningstar Total Stock Market ETF. It holds 3,515 U.S. stocks of all sizes, representing all sectors. I believe this low-cost index fund is one of the best ways to buy U.S. stocks because it gives you broad exposure to the entire American economy. It’s delivered an average annual return of 14.8% over the past 10 years and a 20.2% return over the past year.
During the next bear market, I don’t know which stocks will lose the most value or bounce back fastest. But no matter what happens, I believe investing in VTI will help me own a good share of the winners and earn the average stock market return over the long term. That’s more than enough to build serious wealth as a long-term investor.
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Ben Gran has positions in Vanguard Morningstar Total Stock Market ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.