They say a picture is worth a thousand words. Look at this one.

It’s clear from the above graph that aside from several “bumps” along the way, when we zoom out to view the big picture, long term, 85 years since the end of World War II, the S&P 500 index illustrates why taking a long-term approach to stock market investing is worthwhile for most investors.

This really does say it all, doesn’t it? Not only is there an obvious, inexorable climb from the bottom left to the top right of this chart, but it is a significant rise as well.

Here’s another reason: for every bear market there is a stronger and longer bull market that follows, as sure as the sun rises each morning.

The average duration of a bear market is roughly 13 months, or about 9–12 months. Bear markets typically involve a decline of at least 20% from a market high. While some bear markets have been short-lived (like the 2020 pandemic bear market at 33 days), others have lasted for several years.

The average duration of a bull market is around 2.6 to 5.5 years, depending on the source and the specific period analyzed. Some studies suggest an average of 6.6 years with an average cumulative total return of 339% for the S&P 500 between 1926 and 2019. Other data shows an average of 3.8 years since 1932, with the longest bull market lasting 11 years from 2009 to 2020.

Had you abandoned the market for good after the financial crisis of 2008–2009 you would have missed a spectacular rise in the stock market for the following 11 years!

Notice how each bear market is followed by a bull market that far-surpasses the high of the previous bull market.

In a bear market, the S&P 500 has historically averaged a loss of around 30–35%. A bear market is defined as a drop of at least 20% from a recent high. For example, the average bear market since World War II has seen the S&P 500 decline by around 32%.

The S&P 500 typically gains around 115% to 184% during a bull market, with an average duration of 3.7 to 5.4 years.

So, while an investor may see an average loss of 30 percent on paper during a bear market, she’ll also see an average rise of around 150 percent in the bull market that follows.

Do the math and the answer becomes clear. Most of the time, your capital is growing, and easily overcoming any temporary paper losses suffered in the preceding, shorter bear market. Only if you convert paper losses to realized losses by selling your positions do you actually suffer real losses in your investment portfolio.

Mitigate Those Paper Losses

And to mitigate even those paper losses, the smart investor can buy dividend stocks to receive real money on a regular schedule and get paid to wait for her capital position to return to its previous high. Doing so helps buttress her psyche against these losses.

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What Do Advisors Say?

During these periods, when many investment advisors counsel their clients to stop checking their 401K or IRA statements each day to remove the temptation to sell at the lows, I advise just the opposite.

If the investor stocks her portfolio with reliable dividend stocks that are arranged to pay dividends almost every day, such dividends provide a healthy daily dose of confidence as dividends continue to pile up and build her cash position as a hedge against further losses.

And those dividends can be used to invest in more shares (if they are not needed to pay current bills). Buying more shares at lower prices afford the certainty of getting higher dividend yields and greater income. This is the method referred to as dollar-cost averaging.

Or, dividends can be diverted to high-yield savings accounts or money market funds to add 5% income dividends on a regular basis to offset the investor’s fears related to decreased market value of their portfolio.

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No Need to Risk 100% in the Markets

By the way, I have not suggested that you take 100% of your life savings and invest it all, like one big crap shoot in the stock markets. A good rule of thumb is this: Take 100 and minus your age. This is the percentage of your portfolio value that is safer to invest in the markets, while the remainder should be invested in bonds, CDs, treasurys or other cash-like investments. This ensures that the closer you come to retirement, the more your portfolio will reflect stable, cash-like investments and reliable returns, and the less your portfolio will be exposed to the greater risks of the stock market.

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Your Takeaway

Most investors believe they are at the mercy of the market. This is understandable, especially in the current volatile environment. There is much uncertainty due to the highest tariffs in over 100 years being imposed upon friend and foe, alike.

The market loathes uncertainty as it makes CEOs hesitant to invest and expand their businesses and expand their work forces. This uncertainty bleeds into investor and worker confidence which is now at a three-year low. The greater the volatility, the greater the uncertainty.

A clear path to greater confidence is the study of market history as I’ve demonstrated above. The greatest confidence builder, by far, is the dividend cash that hits the investor’s brokerage account on a near-daily basis. A high-yield portfolio like our RODAT Portfolio that yields around 7% goes a long way to counter balance the volatility of a portfolio that is losing market value during a bear market.

Get paid to wait it out!

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Best,

George Schneider, M.A.

Founder and publisher

Retirement: One Dividend At A Time

Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.

Disclosure: I am long all RODAT Portfolio names. The Portfolio continues to build dividend income with reliable, dependable equities which have long histories of increasing the dividend.

Copyright ©2025, George Schneider