Understanding the Bear & Bull Market

What do you think the bear market and bull market mean?

To answer this, we will concentrate on the actual performance gain or loss that is set as a barrier, and remember, this can be for a stock, a sector or even a total stock market. For example, the terms come into play when a bull market reaches a 20% price gain. Likewise, it goes the other way; we are in a bear market when stocks fall by 20%.

Hearing these phrases means that markets and investors either feel positive or negative about how markets will run.

It can mean a swing either way on the value of your investment portfolio; we tend to find out after the event has started, as we usually are not a party to the information until the stocks rise.

So what should we do, well don’t be greedy in a bull market; if you are happy with profit, sell down some of it, or switch some to a different asset. Don’t continue to try and time the market top, as it seldom works, not that I have seen, over these years. The same goes for buying in a bear market or indeed wondering whether to sell down assets; trying to time the market is something that in history has shown us we miss out on the bounce backs, so it’s best to stay invested.

If you think the fall off in a market is an excellent time to buy, then do so, as it may offer opportunities to hold the stock you wanted and can now buy at a discount. Be careful though, not to chase it until the bottom of a decline.

Over time, markets come back, so people’s investments come back from any bear market; all it takes is patience and time. We also think it’s a good idea to have a well-diversified portfolio to allow the rise and fall of various stocks not to impact you too significantly. It also means that you will reduce risk and provide an opportunity where needed when markets return.

You could always hedge the turn in the tide and buy yourself gold or currency or other staple goods, like consumers or assets that do not correlate with the markets, just a thought?

I did hear a saying and quite liked it, so here it is, and I think it is worth remembering for everyone investing now:

There is no harm in not timing the exact bottom of the market. And remember: loss of opportunity is always better than a loss of capital.

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