SMI on the Radio: Can a Bear Market Be Your Investing Friend? (audio and transcript)

Mar 19, 2019
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If you still have a long way to go before retirement, a bear market can be your investing friend, as SMI executive editor Mark Biller explained yesterday on Moody Radio’s MoneyWise Live. Mark also took caller questions.

To listen to an excerpt from the program, click the play button below — or, if you prefer, scroll down for a transcript. (For more radio appearances by members of the SMI team, visit our Resources page.)

MoneyWise Live, with hosts Rob West and Steve Moore, airs daily at 4:00 p.m. ET/3:00 CT.

To ask a question on a future program, call 1-800-525-7000 and mention you have a question for either Mark Biller or Matt Bell of Sound Mind Investing.


Steve Moore: Stay alert because we’re heading into “bear country” — next Moneywise Live.

Rob, as the executive editor over at Sound Mind Investing, our friend Mark Biller certainly does know his stuff, but he’s got his work cut out for him today if he wants to convince people that bear markets really aren’t all that bad.

Rob West: That’s right, Steve. But I have a feeling he’s up to the challenge. Mark, so delighted to have you back on Moneywise Live. It’s always a pleasure, my friend.

Mark Biller: Thanks. Good to be back with you guys.

Rob West: This topic is from an article in your latest newsletter. And it begins, Mark — as you know — with a short history of where the terms "bull" and "bear" come from. Uh, we hear these terms all the time. I’d love for you to take just a moment and share with our listeners their origin.

Mark Biller: Well, the author Robert Sharp says that the investment usage of the terms bull and bear dates all the way back to the California gold rush and the 1840s and 50s when the miners would entertain themselves with bullfights. So at some point, one of these genius miners decided to start taking the bulls and pitting them against the powerful grizzly bears that roamed wild in that area. And sometimes the bull would win the fight by tossing the bear up over his shoulder. More commonly the grizzly bear would win the fight by wrestling the bull down to the ground. So the bull was winning by taking its opponent up. The bear was winning by taking its opponent down and soon.

Those terms had made their way over to nearby San Francisco where these mining shares were being traded, and they started being used to describe these different groups of investors who are fighting for control of the markets there.

Rob West: Who knew? Well, next time you play some trivia, maybe MoneyWise listeners can get that question right. I like it.

Well, of course, most investors, Mark, are cheering for the bull — they want stock prices to always be going up.

Mark Biller: Right. But that really only makes sense if you need to take cash out of your investments in the next few years — say, the next three to five years. Otherwise you really should be pulling for the bear so you have the opportunity to accumulate more shares at lower prices.

Rob West: Yeah, that’s such a great point. I mean, think about that. If you’re investing on a systematic basis, you don’t want to always be buying at these high levels. You want an opportunity to buy in lower. Unfortunately, we’re not wired to think that way.

Now, Mark, you mentioned something very important there. You talked about if you’re needing the money in the next three to five years. This is why when we talk about investing, we’re saying you need at least a five- if not a 10-year investment horizon. But a lot of investors just watch number the total value of their portfolio and when it goes down they get nervous. They just don’t like the bear.

Mark Biller: Human nature is to feel the pain of those losses more strongly than the pleasure of the gains. And that’s really why, Rob, we wrote this article that tries to make this counter-intuitive point that investors should love the bear if they have a long investment horizon.

And again, it’s like you said, during the investing phase of your life, you’re going to be a net buyer of stocks buying over and over and over. So you want your monthly investing dollars to stretch as far as possible, getting as many shares as possible — and that only happens when prices fall due to a bear market. So for your typical 401(k) investor, they’re investing the same amount every month. So say you’re investing $500 a month, you’re going to get more shares each month if those shares cost less.

Rob West: Let’s put some definitions around this, Mark. You shared with us where these terms come from, but define exactly what a "bear market" really is technically.

Mark Biller: Sure. You’ll see some different definitions if you were to go do some reading on this, but traditionally what most people are talking about when they reference a "bear market" is when the stock market drops at least 20% from a prior high, usually over a span of at least several months. And like we’ve been saying, if you’re in the investing phase of your life, bear markets are kind of like a big sale at Costco — you know, stocks are something that you’re probably going to be buying regularly anyway, so it’s kind of nice to be able to get more for your money when they’re temporarily on sale.

Rob West: As we talk about this, you know, Wall Street had something of a meltdown in December. Investors were panicked. But you think that was actually a good thing — and this goes to your earlier point. So help us process what we saw late last year.

Mark Biller: Sure. And you know when, again, when I’m talking about this, I recognize these episodes are never fun. They’re emotionally tough on investors, but hopefully giving a little different perspective makes it a little bit easier when we do go through these in the future.

So in December, we had what Wall Street refers to as a "correction," which is kind of like a "mini-bear," a drop of more than 10% but not quite to the 20% level where most people would consider it to be a bear market. And the reason that you would maybe call that a good thing is that it does help with valuations. We’ve talked a number of times over the last several months about how stock market valuations are quite high by historical measures. And bear markets and, to a lesser degree, corrections like we have in December, that’s the mechanism of how those stock valuations get lowered down to more attractive prices.

Rob West: So then the question is how do we react when something like that happens? Brenda, she commented on our Facebook page earlier today, and she said, "Last time the market took a serious dive, I panicked and had a knee-jerk reaction." Perhaps she pulled out of the market. And she says, "I just know the best way I can respond is not to look." So do we just stay away from the online access to our investments during a period like this? Is that an appropriate response?

Mark Biller: Yeah, it really is. And you know, of course, depending on your investing strategy, if you can afford — because you’re not going to be taking action or you shouldn’t be taking action anyway based on the day to day gyrations of the market — that’s a great thing to do. You know, maybe you do limit your access so to speak, or your checking on your account, to maybe just looking at your quarterly statements or even your annual statement if you’ve got many, many years, then you’re on kind of an autopilot kind of investing plan.

You know, it’s nice in a way to have your daily Yahoo Ticker, but is that really helping you? Probably not. It’s probably going to magnify the emotional reaction that you’re having when you really shouldn’t be taking action on those day-to-day moves anyway.

Rob West: Yeah, exactly. The ticker, the portfolio online, but also the financial media because that will fuel the emotional response too, won’t it?

Mark Biller: Oh, absolutely. And it’s so crucial to understand that those channels are not there for your financial education! Those are business models that have to fill many, many hours with content and they do that, just like most news stations, by appealing to your emotions — the fear and greed aspects of investing. So they’re very likely going to push you further in whatever direction you would be inclined to be feeling anyway. So when the market falls and you’re feeling a little bit anxious, a little bit fearful, you flip on those channels and they’re just going to magnify that by the 24/7 news cycle of what’s going on out there.

Rob West: Mark Biller from Sound Mind Investing, helping us take your calls today. Perry’s in Nashville, Tennessee. Perry, we’re going to squeeze it into two minutes. Help us out here, okay?

Caller: Yes, sir. The question was is that we get about $60,000 left on our mortgage and we’re heavily diversified in our retirement investments and we do have a sizable emergency savings fund. My question is would it be better to go ahead and pay off our mortgage than to continue to invest?

Rob West: So just to be clear here, Perry, you have enough, you have three-to-six months in savings. You’re on track with your retirement savings. You have no other debt and you could pay off this a $60,000 mortgage and still have your emergency savings intact. Is that right?

Caller: If we paid off, we would probably fall below what you’d consider safe for emergency savings, but continuing either using some of that to pay off, pay down our debt and then make extra mortgage payments instead of continuing to invest. That’s kind of what I was wondering about.

Rob West: Yeah, very good. Mark, your thoughts?

Mark Biller: A lot of that comes down to a comfort level kind of thing and it’s not necessarily an either/or that it has to be either investing or paying down the mortgage. A lot of people successfully juggle both of those at the same time. Um, you know, if you are getting any matching in a company retirement plan, I would hesitate to give that up. But otherwise prepaying that mortgage is certainly not a bad idea, especially with the market kinda high right now.

Steve Moore: We’re chatting with Mark Biller from — lots of great free information. Visit their website,

Steve Moore: Let’s take another phone call guys. Jasper, Tennessee. Greg, what’s your question for Rob?

Caller: Yes, I just had a knee-jerk reaction also when the market dropped, and I put most of my 401(k) back into stable. I left about 20% in investing, and I’m about six years from retirement. Is it a good idea for me to put that back into the market? And should I wait till the market drops a little before I invest it back in there?

Rob West: So you didn’t actually take a withdrawal, Greg — you just moved it inside the 401(k) to the more secure, the stable investment option, correct?

Caller: Yes.

Rob West: Okay. So, Mark, once you’ve gotten out of the market — and we get this call all the time where people say, "You know what, when the market was down" — perhaps in December, this would be good example — "I went to cash. Now I’ve watched it come way back. I’m feeling bad about that, you know, and should I get all back in on one day? Should I do it over time?" Uh, how do you counsel someone like that?

Mark Biller: First of all, for somebody like Greg, you want to determine what would my overall stock allocation be under normal circumstances. So normally you wouldn’t be going all the way back to 100% stock, if you’re six years away from retirement. You might be going back to say 50 or 60% stock, whatever you’ve determined in your plan. So if you’re at 20% now and you need to add back, say another 40% into stocks, you don’t necessarily have to do that all at once.

Y’know, one way to do that would be to say, I’m going to carve this up into four pieces and I’m going to put 10% and now I’m going to put 10% back in in six months. And if at any point the market is down, say 20% from where it is now, I’ll put the rest back in at that point. It’s not so important exactly what those levels are — I just made those up — but the key is to have a plan. The key is to know exactly what you’re going to do and have these predetermined triggers to help get you back in. So if there is no bear market, you’ve got something that says, "Every six months I’m putting, y’know, another quarter back in, so that in no more than two years, I would be back to my full allocation." Maybe you want to do that a little bit quicker even than that.

Rob West: Oh, I think that’s great, counsel. I think the key there is to have a plan, as you said, and let’s go back in on a systematic basis over time. And if at any point the market is down significantly in a short period of time, don’t raise more cash, put more in the market because as we’ve said on today’s program, it’s a buying opportunity! Appreciate your call today, Greg.

Mark, really great counsel for us today. The big takeaways I’m hearing are: make sure your time horizon is right, realize that the bear market is actually a good thing and see it that way — but only to the extent you’re going to be a systematic investor and you’re going to continue putting money in all along the way, and not get too emotionally involved in your decisions.

Mark Biller: That’s exactly right. You have to have a plan, and once you have the plan, you just work it. Work that plan.

Steve Moore: Okay. Well, we’ve been talking, as we’ve mentioned a couple of times, with Mark Biller from If you’d like to read the entire article we’ve been referring to, it’s called, "Learning to Love Bear Markets" — and you’ll find it at

Mark, always a great blessing. Please give our best to all the rest of the staff. Austin Pryor Matt Bell, Joseph Slife — and Mark Biller himself. Uh, thanks so much. We have to pause. We’ll be right back.

Written by

Joseph Slife

Joseph Slife

Joseph Slife has been a news writer for the Associated Press, a college instructor, and a radio host. He and his wife Joye have three grown sons.

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