If you follow and earn through the world of investing, you will probably come across the bull or bear market. These are the two animal-themed terms that describe diverse sets of economic conditions.
For a business investor, financial management and planning mean everything. That’s why both bull and bear markets play an essential role in the investor’s success.
Let us help you take a closer look at the differences between bull and bear markets. It will help you understand how you can use them to make a sound investment decision.
Let’s dive in!
What Is Bull Market?
When the market is on the rise, and there is a general feeling of optimism amongst business investors – it’s called a bull market. The go-to definition of the bull market is a market that rises at least 20% and is sustained for two months. Following so, there is a constant increase in company shares and a sense that this will continue over the long term.
Bull markets specify that the economy is sturdy, and unemployment rates are usually low, giving investors even more confidence and providing people with more income to invest.
What Is Bear Market?
A bear market pronounces the opposite picture, which drops at least 20% over two months. In the bear market, company shares decline in value, and investors feel pessimistic about making new purchases.
A bear market is often caused due to slow economy and a rise in unemployment rates. When the bear market is ruthless, it becomes a depression for business investors. Many investors try to sell their investments to protect their money, access cash or move their holdings to more conservative securities during a bear market.
Bull Market V/S Bear Market
As a business investor, you should always look at the broader market conditions before making any financial decisions. Both bull and bear markets could impact your financial management strategy. However, there are benefits to investing in both.
|Investing In A Bull Market||Investing In A Bear Market|
|The best thing to do in the bull market is to recognize the trend and buy stocks early.||There is more risk tangled in investing in a bear market, but along with the risk comes potential rewards.|
|You can sell your shares when the market hits its peak.||You can buy stocks at a lower price and then sell them when the market recovers.|
|You should look at the long-term investment strategies in a bull market, as any loss will be short-lived||Short-term tactics are more suitable when the market is volatile.|
|Stock prices continue to grow in the bull market.||Stock prices are likely to go down continues in the bear market.|
|Bull markets frequently last longer than bear markets.||Bear markets end quickly than bull markets.|
|When the economy is upsurge, find low-risk funds to develop your money over time.||Hold onto the shares through the bear market duration to get profit when it turns bullish again.|
The Bottom Line
There is no 100% accurate way to predict the future in the bull or bear market as trends could be short-term or lifelong.
A bull market might last an era or only ends in a matter of months. Thus, analyze econometrics carefully to take this into account, along with the types of stocks in your portfolio.
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