Can you make money in a bear market? It depends.

As stock prices continue to fall, many investors are concerned about what that means for their portfolios.

of S&P 500 and the Nasdaq Officially in bear market territory after dropping more than 20% from its peak earlier this year, no one knows how long it will take for the market to recover.

So is it still worth investing in and can you make money in a bear market? That depends on your strategy.

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How No invest in a bear market

During periods of high volatility, it may be tempting to time the market or buy only when prices are at their lowest and sell when they reach their highest.

In theory, this strategy makes sense. You can take advantage of these low prices by investing when the market bottoms out. Then, when the stock price recovers, you can sell your investment for a large profit.

However, timing market success is very difficult and relies more on luck than skill in most cases. The stock market is unpredictable, and even experts don’t know exactly when prices will bottom out and how high they will go. Buying and selling at the wrong time can be costly.

In addition, short-term investment prospects may be risky. Stocks that can rise in the short term aren’t always the healthiest investments overall and may not recover from market downturns. If you put a lot of money into short-term investments in the hope of making quick money, you may lose more than you gain if those stocks fail.

A safer way to make money during times of high volatility

The good news is that it’s possible to make money even in a bear market, and it’s easier than you think. The key is to invest in strong companies and hold those stocks for the long term, regardless of market movements.

Strong stocks in healthy companies are much more likely to recover from periods of volatility. In other words, no matter how much the stock price falls, you can rest easy knowing that your investment is likely to bounce back when the market inevitably recovers.

By holding stocks for the long term, it doesn’t matter how many ups and downs the market goes through on its way to recovery. You don’t have to predict how the stock price will move like you would if you were timing the market. All that matters is that the investment will give a positive return over time.

Historically, markets have seen positive long-term returns. In fact, in the last 20 years alone, the S&P 500 has risen more than 150% of his. This is despite some major recessions, including the dotcom meltdown, the Great Recession, his COVID-19 crash in 2020, and the current recession.

^ SPX data from YCharts

We can’t know exactly how the market will perform in the coming weeks or months, but we do know that it will yield positive average returns over the long term.

There are no guarantees regarding the stock market. But by investing in quality stocks and holding your investments for the long term, you have a much better chance of creating wealth, even if there are ups and downs along the way.