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Investing During A Bear Market: Could A Dollar Cost Averaging (DCA) Approach Make More Sense?

Ironically, some of the best days in the market occurred during bear markets.

This article is sponsored by FSMOne. All views expressed in this article are the independent opinion of based on our research. is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.

While it may not be intuitive, investing during a bear market can be as rewarding as a bull market. Bull markets typically make investors feel good about our investment decisions. On the other hand, bear markets show us exactly how we’ve fallen short in building our portfolio. At the same time, we can invest at a lower valuation and position our portfolio for future success.

Unfortunately, our observation is that many retail investors do the exact opposite of what they ought to be doing. They invest more during a bull market and reduce their investments during a bear market.

For example, during the bull market in 2020 (after the initial crash) and 2021, many retail investors rushed to get in on investment opportunities. The fear of missing out on high returns drove up the stock prices, and even led to speculative demand through unorthodox ways such as subreddit forum wallstreetbets.

Yet, when asset prices are lower like today, investors start to shun investments, even though they can now buy the same shares they were clamouring for at a much lower price. The fear of losing more money, as opposed to missing out, has stopped people from investing more. Some may even liquidate their investment portfolio.

Bear Markets Are Where Long-Term Wealth Gets Created

As investors, the first thing we should remember is that the market goes in cycles. There are going to be periods when it performs well (bull market) and periods when it drops (bear market). If we invest long term, we will encounter and need to accept both types of markets.

In general, bull markets tend to last longer than bear markets. Think of it as how we may take the escalator up a building, but the elevator down.

The duration of how long a bear market lasts may vary significantly. It could be as short as one month (February 2020) or a couple of years (31 months, March 2000). Trying to guess how long each bear market will last, including the current one we are experiencing, may not be a good idea.


In an ideal world, we want to avoid bear markets and only invest during bull markets.

Obviously, this isn’t realistic since none of us will know exactly when the market will crash. However, here’s a chart that explains what the next best thing is that we can do.

In the chart below, the green dots represent the best-performing days while the red dots represent the worst-performing days in the market (S&P 500).

The key observation here is that the green and red dots tend to cluster around each other quite often.

Here’s another table to show this. This table is arranged chronologically.


From the table above, we can see that both good and bad days in the market (S&P 500) are usually near one another.

Another observation is that bad days tend to precede good days.

For example, we can see this during the month of October 1987, which was when the infamous Black Monday occurred (19 October 1987).

Date  Market Performance
16   October 1987 (-) 5.16%
19   October 1987 (-) 20.47%
20 October 1987 (+) 5.33%
21 October 1987 (+) 9.10%

Right after Black Monday (19 October 1987), two of the best days in the market happened. Had investors panicked and sold their stocks on 19 or 20 October, they would have missed one of the strongest 1-day rebounds in the history of the S&P 500.

You can see similar patterns in other periods.

On 29 September 2008, the market went down 8.79%. The next day on 30 September, the market went up 5.42%.

On 8 August 2011, the market went down 6.66%. On 9 August 2011 and 11 August 2011, the market went up 4.74% and 4.63% respectively.

In other words, bad days and good days in the market tend to go together, with bad days usually coming first. And since none of us have a crystal ball that tells us exactly when bad days will happen, the most logical thing we can do is to remain invested in the markets – in hopes that good days will soon follow.

If we sell our investments after a bad day, we simply lock in our investment losses, with no chance of capitalising on a potential rebound.

The table below shows that if we miss the 10 best days in the market over a 15-year period from December 2006 to December 2021, our annualised performance will go down from 10.66% to 5.05%. If we miss the 30 best days, we are better off not investing.

Staying Vested Is Good, But We Should Continue Investing

Having explained why it’s a good idea to remain vested during bear markets, we’d like to suggest that as investors, we should remain “bullish” even during bear markets.

This is because most of the best days in the market occurred, ironically, during bear markets. This may sound counterintuitive to some but empirically, it holds true.

Here are the 25 best-performing days for the S&P 500 from 1961 to 2015.

Here’s a breakdown of the periods when some of the top 25 best-performing days occurred.

  Number Of Top-Performing Days
Global Financial Crisis (2008 & 2009) 10
Black Monday (October 1987) 3
Dot-Com Bubble Crash (2002) 3

We can see that the best days tend to occur during major recessions. By investing more during these downturns, investors can invest when asset prices are lower, and gain higher profits when prices rebound.

Opt For A Dollar-Cost Averaging (DCA) Approach During Volatile Times

Just because it makes sense to continue investing during a bear market doesn’t mean we should rush in and invest every single dollar we have today in the stock market.

Regardless of whether it’s a bull or bear market, markets tend to be more volatile in the short term. If we invest everything we have in the market thinking that it will rebound sooner or later, we may be in for a rough ride.


We can see that in an average year, there is a high probability that a 100% equity portfolio can lose a substantial chunk of its value. However, over the long-term, returns tend to be positive.

As retail investors, it can be disheartening to invest everything we have thinking that the bear market will be over soon. No one wants to invest a huge chunk of money after the market starts declining, only for it to fall even further.

Here’s an example of how our performance may have fared if we invested in 2022.

We use a hypothetical example of two investors.

Lump-Sum Lucy has been monitoring the S&P 500 for a while. After the S&P 500 fell 10% from the start of the year (4,796) to 4,306 on 1 March 2022, she decided to make a lump sum investment of $11,000, purchasing 2.555 units of the S&P 500.

Based on the current S&P 500 price of 3,957 (29 November), Lump-Sum Lucy portfolio is worth about $10,110 today.

Dollar-Cost Deborah started investing $1,000 at the start of each month into the S&P 500. Even when the market declined significantly in 2022, she continued making her investments each month. She also invested $11,000 in total.

Month Price Units Bought (Rounded to 2 decimal place)
January 4,796 0.21
February 4,546 0.22
March 4,306 0.23
April 4,545 0.22
May 4,155 0.24
June 4,101 0.24
July 3,825 0.26
August 4,118 0.24
September 3,966 0.25
October 3,678 0.27
November 3,856 0.26
Total Units Accumulated (Till End Nov) 2.64

Based on her method of investing $1,000 a month, Dollar-Cost Deborah would have accumulated 2.64 units. Based on the current price of 3,957 (as of 29 November), her portfolio is worth about $10,446.

You can see how a DCA approach towards investing can help smoothen out the volatility of prices. Dollar-Cost Deborah doesn’t need to worry about prices falling each month. In fact, she accumulates more units in those months when prices are declining. Having accumulated more units than Lump Sum Lucy (2.555 vs her 2.64) also means she will break even earlier when the market rebounds.

Whether we prefer a lump sum investing or DCA approach, do remember that we must invest in a well-diversified, global portfolio. We can gain easy access to such portfolios via ETFs or unit trusts.

We can consider investing in ETFs and unit trusts through a Regular Savings Plan (RSP) such as the one offered by FSMOne.

An RSP is a monthly subscription plan that enables us to invest a small, fixed sum of money into a particular investment product on a regular basis. RSP adopts the concept of dollar cost averaging, an effective strategy that avoids trying to time markets.

By investing regularly, more units are bought when prices are low and fewer units when prices are high. As a result, in rising or fluctuating markets, the average cost for all the units can be lower than the average price during the same period.

With FSMOne, we can gain access to a wide range of more than 1800 unit trusts from fund managers across the world, all the ETFs offered on the SGX, Hong Kong Exchange, US, Bursa and China A-shares markets as well as managed portfolios that are designed by the FSMOne investment team.

With’s ETF RSP feature, we can use an RSP strategy to start investing in both these assets without having to worry about needing to time the market. And since we can start investing in ETFs via RSP from as little as $50, this makes it accessible for any investor who wishes to start investing regularly.

This Year, It’s Different. Join Us At The FSM Invest Expo 2023

If you are keen to find out more about why and how you can use a Dollar Cost Averaging (DCA) approach towards investing in 2023, join us on 7 January 2023 at the FSM Invest Expo 2023 as our Managing Editor and Co-Founder, Timothy Ho, will be sharing more on why Dollar-Cost Averaging (DCA) is a sensible way to invest during a bear market.

The fact is, as the theme for’s event suggests – This Year, It’s Different, investors will do well to learn more about how and where to invest better in order to navigate the bearish conditions, get an update on what’s going on in the world and its major economies and capture the opportunities that still exist.

If you want to learn more about how we can invest better, join us as well as various other investment experts and experienced investors who will be sharing their thoughts and insights on how investors can invest better for the long term.

The FSM Invest Expo 2023 will be held on 7 January 2023 (Saturday) from 10am to 5:30pm, located at Suntec City Convention Centre, Hall 403. Registration is free.

Look out also for some special activities and rewards at FSM Invest Expo 2023, where there is over $15,000 worth of prizes to be given away through the various lucky draws and sure-win activities. Mingle and stay sharp with the latest in investing, live and in-person at the various booths and activities that has lined up.

STI and S&P500: How Much Would You Have Gained (Or Lost) If You Started Investing In 2021 Using Dollar Cost Averaging (DCA)?