If you follow the stock market in any way, you’ve probably heard a lot about bulls and bears. But how do these creatures relate to investing? Let’s look at what it means when someone says they are bullish or bearish.
What is the definition of a bull market?
When someone is bullish, it means they expect prices to grow over a specific time period. The word refers to broad market indexes like the S&P 500, specific industries, entire asset classes like real estate or commodities, and even individual equities.
What exactly does being bearish imply?
The most obvious culprit, however, is a general weakening or slowing of the economy. As investors lose faith in their current assets, they will begin dumping their stocks.
KEY TAKEAWAYS
- A bear market is defined as a stock market that has fallen by at least 20% from its most recent peak.
- It’s critical to grasp the distinctions between bull and bear markets, as well as how they affect your investment selections.
- To profit from bull markets, traders use a range of techniques, including enhanced buy and hold and retracement.
Is it a bear or a bull market? Sometimes neither is true.
Furthermore, markets may face more dramatic shifts as a result of short-term trends or market corrections that generate downward swings. Bull and bear markets occur over time; the bulls have won as the stock market has performed well.
Bull Markets Have These Characteristics
Investors frequently develop a sour attitude on the market and may stop buying/start selling present investments. They may also begin investing in less hazardous assets.
“Bull markets are typically accompanied by a low number of people in need of work and investors with plenty of cash to invest in the markets.”
Businesses and businesses typically receive greater equity valuations, resulting in a high volume of initial public offerings (IPOs).
Investing in rising and falling markets
Buying equities early in a bull market and selling them before they reach their peak is one strategy to profit from rising prices. In a bear market, where losses are more likely, investing in equities should be done with extreme caution, as you are likely to lose money – at least initially.
If you’re looking to diversify your portfolio, a bear market can be a fantastic moment. You can invest in less risky assets such as bonds or look for dividend-paying equities.
Long-term success through investment
Long-term strategic asset allocation has proven to be the most effective technique for handling market changes over time. Working with a financial advisor to build a diversified investment portfolio can help you weather volatile markets, avoid the near-impossible challenge of market time, and make reasonable — not emotional — investing decisions.