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Bull or Bear – What to Choose & When

Which are the signs an investor should know to understand the stock market mood?

Are you a regular investor in stock markets? Then you might have definitely experienced the effects of a bear or bull market. Even those people who don’t have much interest in stock market investment might have also heard about terms like bullish and bearish trends. So, let’s find out what exactly is bear and bull.

In simple terms, if the market is gaining the trend is known as bullish and if it shows the trend of going down, it is called bearish. Investors would first look at the mood of the market when it is opening for the day. If it goes up a majority of investors would be happy and their mood worsens if it goes down.

But if the market is going up for just one day and declines for successive days, it cannot be termed as a bullish trend and vice versa. If the market is in a declining mood for a few months, the market sentiments are bearish. If the market rises 20 per cent or more from its recent peak, it can be termed as a bullish market. Major international financial media outlets generally use +/- 20% threshold as a rule of thumb to label bull markets or bear markets.

Growing economy

A bullish market represents growth in the economy and the general prosperity of listed companies. However, a bearish trend is an indication that the country’s economy is not showing enough promise and the corporate results are not encouraging. The prospect of a company rises in the stock market when its quarterly earnings would go up.

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If the result of the company is good, investors tend to buy the shares of that company, effectively helping the stock to gain more. Similarly, if a particular company has failed to deliver a good quarterly result and guidance for the next quarter, there could be a negative impact on its share prices.

Investors generally go with the market mood and sentiment. In short, all the fluctuations in the stock market might not be dependent on fundamentals or growth prospects alone. As you might have witnessed several times, the share price of a company, which was doing extremely well one day, could go down drastically without any valid reason. Then you would wonder why is it happening so.

The origins of “bear” and “bull” are said to be coming from those animals who show attacking instincts. A bull will thrust its horns up into the air, while a bear will swipe down. Something similar to the action in a stock market.

Worst in history

Do you know which was the worst bear market in the history of the U.S.? It was precipitated by the stock market crash of 1929, which led to the Great Depression. The following bear market lasted for around three years, experts pointed out. The longest bull market in modern history was in March 2020, when the U.S. markets entered into a bear market following the spread of the coronavirus pandemic.

What’s important for you?

You must have got an idea about the bear and bull market. You have to also realize that a majority of investors consider the bull market as an ideal opportunity to buy good, quality stocks. The reason for such a decision is that the good stocks are bound to make ag good comeback when compared with ordinary stocks. With the fundamentals in good shape, all blue chip companies can quickly bounce back when the market trend reverses.

If you are buying when the market is already at its peak, there is a danger of losing money when there is a crash. But if you are buying at dips, there is a chance that you can make money when the market rises. If you are not sure about the dips, it is better to buy at regular intervals instead of buying the stocks at one go. You can buy a portion of stocks at a particular price. If the price of the stocks come down again, you can add the stocks so that you can average out the price.

In short, if you notice the trend of stock markets closely, you can make money irrespective of the fact that market is bearish or bullish. If you have done your research well, there is always an opportunity waiting for you at the market.

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