Bull vs Bear market. What is the difference?
There are many options, complications, and foreign terminologies in the world of investment. The terms “bull” and “bear” are regularly used to describe market circumstances.
These phrases explain the general state of the stock markets, including whether their value is increasing or decreasing. Additionally, as an investor, the market’s direction is a powerful factor that greatly affects your portfolio.
Determining how each of these market circumstances may affect your assets is crucial.
What is a Bull market?
A financial market is said to be in a bull market when prices are increasing or are anticipated to rise. The word “bull market” may refer to anything that is traded, including bonds, real estate, currencies, and commodities.
However, it is most frequently used to describe the stock market. The term “bull market” is normally reserved for prolonged periods in which a significant share of asset prices is rising.
This is due to the fact that while trading, the prices of securities essentially fluctuate continually. Bull markets often last for several months or even years.
What is a Bear market?
Bear markets, which happen when stock values fall 20% or more over a protracted period, are the exact reverse of bull markets in that they are driven by pessimism.
Bear markets sometimes take place at times of economic downturn and elevated unemployment, whereas bull markets are typically driven by economic strength.
Investors desire to sell, frequently running for the security of cash or fixed-income instruments instead of buying into the market. There is a seller’s market as a result. Bear markets can exist for a short while or for a long time.
Bull vs Bear market
Following is the difference between Bull and Bear Market based on various factors:
How should you invest in a Bull or Bear market?
- Value equities are often better investments in down markets, whereas growth stocks typically perform well in bull markets. Because people believe that “undervalued” equities must be inexpensive for a reason while the economy is expanding, value stocks are often less popular during bull markets.
- Your time horizon will largely determine how you invest in stocks during bull and bear markets. It doesn’t matter if the market is now bullish or negative if you won’t need the money for a longer time span.
- If you are a buy-and-hold investor, you generally shouldn’t alter your investment approach in response to current market circumstances.
- Even when other asset classes are experiencing bull markets, the stock market can be bearish, and vice versa. Allocating a portion of your portfolio to gold or real estate may be a wise decision if the stock market is rising and you are worried about price inflation.
- You may think about raising the percentage of bonds in your portfolio or perhaps turning a piece of it into cash if the stock market is down. Additionally, you should think about geographically distributing your holdings so that you can profit from bull markets that happen in different parts of the world.
- Keep your attention on the long-term potential of the firms in which you have investments, regardless of the status of the stock market. Businesses with strong fundamentals are more likely to generate long-term gains that are significant for your portfolio.
Thus, we hope that by now, you have understood the concept and the difference between Bull and Bear markets.