When it comes to bulls and bears, only a fool would want to be face to face with one. Considering the fact that either one of these two beasts could pulverize us without a second thought, it is kind of ironic to think that we use these terms to describe the climate of our stock markets. Then again, the stock markets can destroy our pocketbooks every bit as viciously as a bull or a bear might do our bodies.
But when you are discussing the stocks, the terms bull and bear do not denote danger—they are simply used to describe which way the market is going.
- Bull Market—in this kind of market, all of the signs point to confidence. Both investors and consumers are feeling brave, and the stock numbers are going up to prove it. The number of shares being traded will go up, and the amount of companies entering the market will also increase. Statistically, a bull market is a rise in the market’s value by at least 20 percent.
- Bear Market—this is the exact opposite of the bull market. In a bear market, you are going to see a lot of timidity. Investors will tend to be on the fence in this situation, and consumers are going to be relatively hesitant to engage in the markets. Stock prices will either stay the same, or decrease. In a bear market, the environment becomes very stagnant as the consumers wait for the bulls to push the prices up once more. A drop of 20 percent indicates this kind of market.
Before you invest, it is very important to know which kind of market you are entering. Consumer demands tend to vary depending upon which way the economic winds are blowing, and the best investors pay attention to their changing priorities. Market timing is of the utmost importance no matter if the market is a bull or a bear.
The best thing to remember with the stocks is buy low sell high. It’s kind of like riding a wave—you want to purchase stocks when they are pretty cheap, then jump the bandwagon once they have gone up pretty high, that way you can make a profit. But knowing when to bail takes a lot of gumption.
See, most investors will fall into the trap of allowing their emotions to direct their finances. This is a big mistake because while your instincts may influence you to believe that a bear market is one that you do not want to engage in, if you act on those fears, you might miss out on a major payday.
Any investor will tell you that when it comes to the stock markets, nothing is certain. If you want something that you know is going to pay off, then take advantage of things like “buy one get one free” deals, and the free checking account. Otherwise, investing too much of your money in the stock market could compromise your peace of mind. And there is simply no point in potentially making a ton of money if you are going to lose sleep over it.