The Paradox of Bear Markets
When markets crash, every instinct tells you to sell or stop buying. But historical data tells a different story. The best time to buy is when everyone else is selling.
What History Tells Us
Let's look at how DCA performed during major bear markets:
| Bear Market | Peak to Trough | DCA Recovery |
|---|---|---|
| 2000-2002 (Dot-com) | -49% | 2.3 years |
| 2007-2009 (Financial) | -57% | 1.8 years |
| 2020 (COVID) | -34% | 4 months |
| 2022 (Tech) | -25% | In progress |
Key insight: In every case, investors who kept buying during the crash recovered faster and ultimately achieved better returns.
Why DCA Works in Crashes
- Lower average cost: Buying at lower prices reduces your cost basis
- More shares: Your fixed investment buys more shares when prices drop
- Automatic discipline: You can't time the bottom, so you catch it automatically
- Emotional buffer: The system removes fear from the equation
Practical Tips for Bear Markets
- Automate your investments so you don't have to make decisions emotionally
- Increase contributions if possible—prices are on sale
- Avoid checking your portfolio too frequently
- Remember: this is temporary, markets have always recovered
The Bottom Line
Bear markets are terrifying, but they're also the best opportunity for long-term investors. Using DCA during a bear market is like getting a permanent discount on everything you buy.