A guy from a non-financial or non-investment background can easily get confused about why we talk about these giant animals in an investment blog. In reality, bull and bear in the stock market means something else. Scroll down to read more about a bull market and a bear market.
A bull market is referred to a condition where stock prices are on the rise. The bullish term applies to broad market indexes such as the S&P 500, real estate, commodities, individual stocks, etc. In the bullish market, prices are likely to rise for a certain period of time, and people tend to buy more stocks in that period of time in order to gain quick and higher returns. If we see in the long-term, the bull market has an upward sloping graph.
A bear market cannot be defined in one manner as it is pretty much consistent and steady. Prices are likely to fall due to a shrinking economy caused by a higher employment rate or an increase in inflation. A bear market usually occurs when the prices fall at least by 20% from the recent high. People tend to sell stocks more to avoid losses in the bear market.
If you are beginning to invest in stocks, then it’s not necessary to imply your strategy according to the market cycle. Actually, there is no right time to invest in the stock market, and you just need strong research and an effective strategy to be a winner in any market condition. Here’s how:
Instead of one roaring stock, you must go with multiple well-reputed companies with a consistent performance in the market. By incorporating diversification in your portfolio, you can overcome market fluctuations and gain a consistent return in the long term. It is very rare that the entire stock market falls altogether. Mostly a specific industry or sector get affected. A diversified portfolio can absorb the effect of one industry and keep your investment safe.
What goes up always comes down. The same is the case with the stock market. A bullish effect is not sustainable. It can be up there for weeks and months, but there must be a bearish effect in the end. So, always be prepared for such scenarios. You have to stay updated with the market and back your investment with adequate research to keep you informed about the upcoming market conditions.
A certain event or even a publicity stunt can make a company star in the stock market overnight, but never after those stocks as their performance is temporary. Always go companies that are older and have a constant reputation in the market. Companies that pay a good dividend and increase the return as the company grows must be your priority.
Fear and greed are the two of the most triggering emotions in the stock investment. Always follow the market and economic trends while trading your stocks. Gut feeling and instincts are not always right, but economic conditions and companies’ performance always works well.
Never stuck in anticipating when it’s the bull market and when it’s bear market. Always keep your plan clear and strategic to make the most out of the stocks.