What to do in a bear market: relax.

A bear market is when the market is 20% or more off its high for the past year.

Ritholtz Wealth Management’s director of research Michael Batnick discussed why “bear markets suck” but I took something different away from his piece: bear markets are not as frequent nor as common as most people believe.

“Going all the way back to 1897, the Dow was in a 20% draw down 33% of the time. But a lot of this is skewed by The Great Depression. . . . If we start from 1950, that number collapses to 16.5%.

But a 20% decline should hardly be enough to strike fear into a long-term investor. When you’re down 20% you start to get nervous, at 30% you start to lose sleep, at 40% you hit eject … So why all the fuss? Because a bear market can wipe out years worth of gains. YEARS!

At the bottom in 1932, the Dow was back where it was in 1903. At the bottom in 1974, the Dow was back where it was in 1959; at the bottom in 1980, the Dow was back where it was in 1964; at the bottom in 2009, the Dow was back where it was in 1997.

I understand why people spend so much time preparing for an unlikely outcome, but worrying too much about the downside prevents you from participating in the upside. The most important thing is to build a portfolio that can capture the upside while allowing you to sleep at night during the inevitable downside. There is not a universal portfolio. Everyone’s gotta find what works for them.”

Batnick nails it. My grandfather, who was born around 1875, was an investor during the Great Depression and the Second World War. He did not sell. He bought the bargains. His Canadian bank stocks kept paying dividends and he exited the bear market in better shape, in many ways, than the way he went in. His advice? Buy quality and hold. I am trying to take dear old gramp's advice to heart.