Finance Lessons from Bear Country - Part Two: Navigating Bear Encounters
Through my camera, I watched as the grizzly lifted its massive head, suddenly alert to our presence. Its nostrils flared, testing the air for our scent. The moment of discovery—when you and a wild bear become aware of each other—is pivotal and determines everything that follows.
In my previous note, I explored how the preparation for bear country adventures parallels preparing for market volatility. Today, we'll explore what happens when preparation meets reality—when you encounter the bear, whether in the Alaskan wilderness or your investment portfolio.
The Inevitability of Encounters
If you spend enough time in bear country, you will encounter a bear. Similarly, if you invest long enough, you will experience market downturns. It's not a question of if, but when.
The average investor will experience about 14 bear markets in their lifetime. Just as I don't take clients into the backcountry with the hope of avoiding bears, I don't guide investors with the unrealistic promise of sidestepping every market correction.
What determines your outcome isn't whether you'll face these challenges—it's how you respond when you do.
Real Bear Encounters
Story #1: The Massive Sow
The sun was low in the sky as we made our way down a game trail toward camp when we spotted her–a massive Kodiak brown bear with two cubs in tow headed our direction. She hadn’t noticed us yet, giving our guide precious seconds to usher the group off the trail into a small stand of trees nearby.
What went right: We stayed calm to avoid startling her, and most importantly, we did not run. We watched quietly as a pair of fluffy brown ears seemed to float across the top of shoulder-high grass that stood between us and the bear.
What went wrong: One group member shifted her weight, perhaps reaching for her camera. CRACK! A twig below her foot snapped in half. In a heart-pounding moment, the sow, now just feet away, rose to her full height. Towering over us, she unleashed a barrage of chuffs–air blown through the nostrils–to indicate aggression or stress typical of a mother defending her cubs.
Lesson learned: Even with proper training, instinctive reactions can override reason in the moment. Just as we practiced our bear encounter protocols before venturing into the bush, investors need to rehearse their market downturn responses before emotions take over.
Story #2: The Beautiful Blonde Grizzly
Just outside camp we spotted her–a beautiful blonde grizzly grazing in a nearby meadow. The evening sun cast a warm glow across her back and the sedge grass radiated a vibrant green. There was a splash in the stream to our right. An eagle dragged a large fish onto the shore opposite us and the bear. Hoping for an easy meal, the bear waded across as the eagle flew off with the fish clutched tightly in its talons. Sniffing the ground where the fish had lain, she failed to notice a larger bear approaching. Startled, she spun around and sprinted across the stream, water flying everywhere.
Perched atop a cliff on the opposite side, we watched as she hurtled our direction. Surely she would turn upstream after crossing, I thought to myself. Midway across, she and I locked eyes and it was clear she was headed right up the cliff into my group. Instinctively, I stepped in front of my group so I would take the brunt of any impact. As she launched herself up the cliff face, I used my sideways momentum to rotate my body so she could slide past me, our eyes just inches apart.
What went right: My group stayed together, they did not run and instead trusted our preparation. One person even let off a burst of bear spray as a safety precaution.
What went wrong: Nothing, because we stuck to our system. The fear was real, but the preparation neutralized any potential danger. Ok, maybe one thing didn’t quite go to plan: me getting a burst of bear spray in the face. Hey, at least I can laugh about it now (-:
Lesson learned: Systems work if you let them. Our training on how to react and how to use bear spray did exactly what it was designed to do, just as a well-constructed portfolio is designed to withstand market pressures. Trust your preparation, especially when fear is at its peak.
Bear Market Encounters
Case Study #1: Weathering the 2008 Financial Crisis
When Lehman Brothers collapsed in September 2008, clients were understandably concerned. Most clients responded like Mike and Elizabeth. They had spent a lifetime building up a nice nest egg and seeing the market and their portfolio suddenly drop, they reached out to us.
“Is there anything we need to do given the financial panic going on?,” they asked nervously.
Meanwhile, another client called in a panic on March 9, 2009. John (name changed) had a substantial portfolio and was a few years from his target retirement date. The S&P 500 had fallen 50% from its high, and now financial institutions were failing.
“I want to get out. Sell everything, stocks, bonds…go to cash,” he instructed us, voice tense with worry.
Just as I would never advise running from a grizzly, we counseled each concerned client against running from the market. We reviewed their investment plans, which we had crafted during calmer times. It accounted for downturns like this. We reminded clients that their time horizons extended decades beyond their retirement date, not just to retirement.
Instead of fleeing, we stood our ground—and even rebalanced, buying stocks and real estate while they were down. While many investors were paralyzed by fear, Mike and Elizabeth’s portfolio had already started the recovery process.
Unlike Mike and Elizabeth, John chose to run from the bear. He had us liquidate everything on March 9th, the day of the bottom of the market. It would be a million dollar mistake.
The outcome: Between March and December of 2009, the S&P 500 rose 68% while the Dow Jones Real Estate Index gained 130%. Rebalancing during the Financial Crisis would turn out to be the best buying opportunity in a generation. Today, Mike and Elizabeth are better off than ever before. Unfortunately for John, that million dollars is gone forever.
Case Study #2: The COVID-19 Plunge
Patricia (name changed) is a nurse and was on the front lines when the pandemic crashed markets in March 2020. The speed of the decline was breathtaking—the fastest 30% drop in market history.
Don was an engineer and just a couple years from retirement when COVID hit. At our first meeting after the crash began, Don was remarkably calm. “We survived the dot-com bust and the Financial Crisis. Why should this time be any different,” he said. “You’re going to tell me to stay the course, right?”
Don had internalized the bear country wisdom: when confronted by a bear, don’t run; when confronted by a bear market, don’t sell.
Not only did he stay invested, but he also saw the downturn as an opportunity. We strategically harvested some tax losses and rebalanced his portfolio, adding to stock positions while prices were low.
Being on the front lines at the hospital, and seeing the sickness and death, Patricia allowed that emotion to influence her financial decisions. I still remember that phone call.
“I can’t take it anymore, I think it’s going to get a lot worse and I need to protect what I have left. Sell everything and go to cash,” she said with a trembling voice.
That day was March 12, 2020. The S&P 500 would bottom out just 10 days later before rocketing up 60% by year-end. In December, Patricia sheepishly called us to get reinvested. We ultimately settled on dollar cost averaging back into the market over the course of 12 months. Can you guess what happened next? Just as the portfolio was fully reinvested in December of 2021, the market (stocks, bonds, and real estate) experienced one of the worst years as all asset classes plummeted in value. Talk about adding insult to injury. Patricia rode the roller coaster down twice without ever riding it up. Nobody thinks they’re going to make this mistake, but they do.
The outcome: By August 2020, just a few months later, Don’s portfolio had recovered its losses and reached an all-time high. The additional shares purchased during the downturn added significant value as the market recovery continued through 2021. As for Patricia, five years later her portfolio still hasn’t recovered to where it once was.
Standing Your Ground
Never Run: The Dangers of Panic Selling
When hikers run from bears, they trigger the predator's prey instinct. Similarly, when investors flee falling markets, they often trigger a cycle of hurting their own finances.
The data on market timing is sobering:
According to a JPMorgan study analyzing the S&P 500 from January 2000 to December 2019, if you missed just the 10 best market days over that 20-year period, your overall return was cut in half.
If you missed the 30 best days, you actually lost money over those two decades, despite the overall market delivering positive returns.
Perhaps most critically, six of the 10 best market days occurred within two weeks of the 10 worst days. This means investors who sold after steep declines often missed the powerful recovery days that followed.
Consider March 2020: The Dow Jones dropped 2,997 points on March 16 (its worst day since 1987), but then rose 1,049 points on March 24 as the recovery began. Those who panicked and sold after the drop missed the bounce that followed.
The story repeats across market cycles. During the 2008 crisis, the market's worst day (September 29, when the Dow fell 777 points) was followed by substantial gains in October. Those who fled the market missed the beginning of what would become a historic bull run.
Just as I train my photography groups to stand their ground during a bluff charge (unless physical contact is imminent), I train my investment clients to withstand the market's frightening charges without abandoning their positions.
Using Your Tools: Rebalancing During Downturns
The bear spray in your pack is useless if you can't reach it in time. Similarly, the value of rebalancing is lost if you don't employ it during market volatility.
Rebalancing—the practice of bringing your portfolio back to its target allocation—is one of the most powerful tools available during bear markets. It automatically enforces a "buy low, sell high" discipline that capitalizes on market movements rather than falling victim to them.
Here's how it works in practice:
Let's say your target allocation is 70% stocks and 30% bonds. After a market correction where stocks drop 20%, your allocation might shift to 60% stocks and 40% bonds as the value of your stock holdings decreases.
Rebalancing would involve selling some bonds and buying stocks to restore the 70/30 balance. This means you'd buy stocks when they're relatively cheaper and sell bonds after they've held their value or appreciated.
“Buy low, sell high, rinse and repeat until rich(er),” as I like to say. Or as our friend Warren Buffett has said, “It’s simple, but not easy” because human instinct is to do the exact opposite. Buy after it’s gone up, and sell after it’s gone down.
Communication Devices
Your Bear Guide: Working with a Financial Advisor During Turbulence
In bear country, an experienced guide can make the difference between a dangerous situation and a memorable wildlife encounter. Similarly, the right financial advisor provides crucial guidance during market turbulence.
When to call for help:
When headlines are causing anxiety or sleepless nights
Before making any significant portfolio changes
When personal circumstances change (job loss, inheritance, etc.)
When the urge to time the market becomes strong
What good advice looks like during a crisis:
It focuses on your personal plan, not market predictions
It acknowledges your concerns without reinforcing fear
It provides historical context for current events
It offers concrete actions aligned with your long-term strategy
It reminds you of your "why" beyond the numbers
Bad advice, by contrast, proposes dramatic portfolio changes based on predictions about market direction or suggests you can successfully time your exit and re-entry.
Staying Connected: Information Sources During Market Volatility
Just as we carry satellite communicators in the remote backcountry, investors need reliable information sources during market turmoil. However, not all information channels serve you equally well during downturns.
Sources that tend to help:
Direct communication from your financial advisor
Quarterly investor letters from fund managers you respect
Data-driven analysis of historical patterns
Academic research on market behavior
Sources that often harm:
24-hour financial news channels (I’m looking at you CNBC!)
Financial rags (e.g., Kiplinger’s, Barron’s, Money, Fortune, Forbes…)
Market timing newsletters
Social media financial discussions
Friends and family with strong opinions but no expertise
The goal isn't to avoid information during downturns but to filter the signal from the noise. One technique I recommend to clients is limiting financial news consumption to 30 minutes per week during volatile periods. This provides sufficient awareness without triggering panic responses.
The Temporary Nature of Encounters
Every bear encounter eventually ends. The animal moves on, slipping silently into the woods. Every bear market also ends, giving way to new growth and opportunity.
What remains permanent are the lessons we learn from these encounters. Each successfully navigated challenge, whether in the backcountry or the financial markets, builds resilience and confidence for the next one.
In my years guiding photographers and investors, I've observed that those who weather their first challenge successfully approach subsequent encounters with markedly less fear. Experience builds upon itself, creating a foundation of earned confidence that no amount of theoretical preparation can provide.
In the final installment of this series, we'll explore how the ultimate reward for properly navigating bear country and bear markets isn't just survival, but the profound satisfaction that comes from aligning your journey with your deepest values and goals. We'll explore how the discipline developed through challenging encounters creates freedom to enjoy the journey.