When investing, people often talk about the bulls and the bears. In this article we look at what they mean by the bull and bear and we analyze how you get in the bull and bear markets!
What is a bull market?
A bull market is a well-known Wall Street term. When we talk about a bull market, we are talking about a market where the prices are mainly rising. This is why there is a statue of a bull outside of many stock exchanges. We thus speak of a positive market sentiment in which the prices continue to rise.
Many people confuse the bull and bear market. You can remember the bull market by remembering that the horns of the bull are pointing upwards.
What is a bear market?
A bear market is the opposite of the bull market and it is the nightmare of many investors. When there is a bear market there is a predominantly negative market sentiment. The prices of the stocks are then mainly falling. You can remember the bear market by remembering that the bear's legs are facing down when he is standing. Incidentally, there are no bear statues in front of stock exchanges, probably because investors do not want to face their fears too often.
How can you benefit from a bull market?
When there is a bull market, there is great confidence among the investors. The people who participate in such a market are also called the herd. This is exactly the most sensible strategy in a bull market; namely going with the trend. A bull market is a good time to buy stock.
It is important, however, to stay sharp in a bull market because after each peak a valley follows. As was shown in 2008, such a valley can be quite deep and last for a long time. When the prices start to fall, it may be wise to sell your stocks again.
How do you prevent losing money in a bear market?
With a bear market, there is a period in which the prices of stocks fall sharply. Investors are generally very pessimistic about the future. Many investors think that a bear market is a reason for panic; with all those falling prices there is no money to be made!
Nothing could be less true! It is possible to go short. When the prices are falling strongly, it is wise to use this powerful possibility. When you go short, you earn money as soon as the prices of stocks fall. Thanks to this modern option, which you can use with online brokers, you can earn money investing in a bull market as well as in a bear market.