Due to recent market volatility, many are claiming that we are in a bear market. Although frightening, it isn't the end of the world. In this climate, a financial advisor's duty is to educate their clients about these turbulent periods and to prevent panicked investors from making poor choices. Below are some facts that financial advisors and investors alike should keep in mind.

Defining a Bear Market

There are a variety of definitions for a "bear market." A bear market is not the equivalent of a recession. One difference is that they have different signaling factors. Recessions have a beginning and end that an official or recognized institution acknowledges. According to Investopedia.com, a bear market is defined as: "A downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average or Standard & Poor's 500 Index, over at least a two-month period." Other definitions use a "peak-to-trough" approach, similar to Standard & Poor's explanation: "A peak-to-trough decline of at least 20% of the S&P 500 Index." When defining bear markets in history, the latter definition is typically used.

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