Bull and Bear Markets in Canada since 1956

I must thank RBC Asset Management for posting the bull/bear graph. The original post can be found HERE.

I have a friend just starting down the investment path. Her first trade was CIBC. She picked up some shares well into correction territory. CIBC was off its high by about 14%.

The worrisome thing about corrections is one never knows when a correction will continue down into bear territory; bear territory is a drop of 20% or more from its high of the past year. Riding out a bear market, even when the stock held was bought at a decent discount, can be tough for a new investor. A nasty bear can easily devour 40% of a stock's paper value. Paper losses of that magnitude play havoc with an investor's confidence and patience.

Look carefully at the chart below. Note that the good times, the bull markets, historically run longer and stronger than the intervening bear markets. Personally, I feel I have lucked out when I pick up a good, solid stock discounted by 20% or more.

As I write this Brookfield Asset Management (BAM.A) is down a full 18% from it high of the past 12 months. Is this a buying opportunity? That's an individual investor's call based on a reasoned, gut feeling. Accurately predicting the future is beyond most of us. 

Only buy stock in good, solid companies and don't invest too heavily in anyone stock—diversify—and if you can also tap into a generous dividend, as my friend did with CIBC, then you should do just fine.