A bear market is coming. As the stock market continues to move higher, we are getting closer and closer to a major pullback. And when I say major pullback, I am not talking about a 5% or 10% drop. I am talking the same kind of drop we saw back in 2008.

Why? Remember back then when housing prices were hitting record highs each month? Everyone was buying thinking prices will never go down? It was shortly after this point when the bubble burst, home values tanked, and millions lost their homes.

Now look at the stock market today. The Dow Jones started the year under 20,000. It is currently over 24,000. Never in the history of the stock market has it surpassed 5 thousand point thresholds before. And some experts think we will hit 25,000 before the end of the year.

Many people I talk with are getting in thinking that stocks will never be cheaper. Sound familiar?

A bear market is coming. This post is going to walk you through how to prepare and protect yourself.

Photo Source

What Is A Bear Market?

For some newer investors reading this post, you might be unfamiliar with the term bear market. A bear market is when the stock market declines by at least 20% over the period of two months or more. The difference between a bear market and a correction is that a correction is a quick hit.

Most corrections happen over the period of a few days. A bear market lasts at least two months. On average, the length of a bear market is 15 months or just over a year.

When we enter a bear market, prices fall and investors become pessimistic about future growth. This emotional feeling is self-serving as more and more investors sell, forcing stocks lower.

How To Protect Yourself Before A Bear Market

Before a bear market hits, you should be putting any money you were going to invest into cash holdings. This includes savings accounts and money market accounts. While you won’t earn much interest doing this, you will protect yourself from losses.