Investing

BULL MARKET
VS BEAR MARKET

When investing in stock markets, you need to be aware that they do not always perform the same. The market can move upward, which we call a bull market. And sometimes, the market can move downward, which we call a bear market. Bull and bear are terms derived from how the two animals attack. The bull uses upward movements with its horns to attack, and the bear goes low with downward movements. As you become more familiar with how markets perform, you will be able to quickly identify when it is a bull market vs. a bear market. As you become more skilled, you will even be able to foresee when the market will change. Creating a diverse investment portfolio does come with some risks. Still, the risks are managed when you understand what you are doing.

Bull Market
A bull market is a positive movement in the stock market with a line generally trending upward. A thriving economy and low unemployment are usually the causes of bull markets. Investment prices are rising for a sustained period, and market confidence is high. Investors are eager to buy stocks with the hopes that they will grow in value. This increase in the demand to buy and hold onto stocks creates a buyer’s market.

Bulls are fuelled by economic strength. A higher allocation of stocks is optimal in a bull market, as there is more potential for higher returns. Investors can take advantage of the rising prices of a bull market and buy stocks early on to sell them before they reach their peak.

Bear Market
A bear market is an adverse movement in the stock market with a line trending downward, generally 20% from peak to trough. Due to stock prices falling for a sustained period, investors are more risk-averse and may want to sell their stocks out of fear and anxiety that the market will crash. A seller's market is created when more stocks are sold than bought.

Bear markets usually occur in periods of economic slowdown and higher unemployment compared to bull markets. In preparation for a bear market, where there is more loss potential, investors can protect their money by having more cash or fixed-income security assets.

As a new investor, you may get caught up in checking the markets daily because you do not want to lose any money. Experts advise that if you are investing for the long term, then refrain from doing that. You may be in a bull market, and when you see a slight dip in the line, you panic and jump out of the market, only to see after a few minutes that the market has readjusted itself. You have now missed out on receiving greater returns. Market fluctuations are expected and may not always cause harm to your portfolio. So do not be hasty because a now decision can significantly impact your future financial goals.

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