Tag Archives: bear market

What is a Bear Market, and How does it Affect Investments

What is a bear market? While there is no one definition of a bear market, in short, it is when the stock market falls for a significant amount of time. Though the amount of the decrease can widely vary, bear market is usually defined as a drop of 20% or more. To be considered a true bear market, this fall must last for a few months at least, as opposed to a correction which is a short-term decrease. Bear markets can be caused by a variety of things. The economy can play a huge factor in a drop in the stock market.

A bear market can really throw a kink into short term investor’s plans. The best way to make money with investments are to “buy low and sell high”. At the beginning of a bear market, many may buy stock in hopes the market will correct itself and cause quite a gain in money. If the market stays down, however, there is no money to be made. Stagnant money – especially at low rates – does nothing positive for a portfolio. The expectation that money can be made with a sell can drag out for months, giving false hope to the investor.

If you are a long term investor, however, things may look good. If you have no intention of selling anytime soon, buying stock with appropriate companies at such low prices can really pay off in the long run, when the market gets back to normal.

You may be tempted to think the trend will last forever, and sell what stock you have in attempts to keep your dignity. This isn’t always the best idea. Selling stocks for less than you bought them can cause a significant loss. The best thing to do in this situation is to put your money with safe companies that you know will eventually rise up. It is important to look at the business itself and not their stocks at one point in time. If you decide to buy safe stocks at such a low price, holding on to them until the market gets back on its feet can really help you in the long-run.

What is a Bull Market, and How does it Affect Investments

A bull market doesn’t have any one specific definition, but the general idea is a significant increase of the stock market of an extended amount of time. Stocks can fluctuate often, as is the nature of the stock market, but to be considered a bull market, it is generally accepted that 80% of all stocks rise considerably – at least 15-20%. You may wonder what would cause such a variation, and the answer is usually the economy. A better economy causes lower unemployment, higher spending, and companies almost always do better, which increase stocks. Other factors definitely are considered, but economy seems to have the largest influence.

What does a bull market mean for the investors? If you can time it right, there is great money to be made in a bull market. By buying stocks before they rise too high and selling as they reach their peak, a lot of return can be expected. However, this is easier said than done.  The stock market is unpredictable at best, and can be near impossible to anticipate.

There are things to look out for when trying to map out the correct times to buy and sell your stocks during a bull rise. Watch for “dips” in the surge of prices. This can be a great time to buy shares, if you were unable to catch the rise in the beginning. Of course, there is always the chance that “dip” turns out to be the beginning of the inevitable downfall, so it can take a trained eye or good luck to catch it at just the right time.

Another thing to consider is that most investors, especially experienced ones, will fight for a good trade or sell in this market. Some hold on to their shares for dear life, some are a little more liberal with their trades, but you can be sure the market will be active in this time period.

All in all, the bull market can be a great time to make a substantial amount of money, if you are willing to take the risk. Do your research, consult your broker if you have one, and make informed decisions, and you may be lucky enough to thicken your investment earnings and portfolio.