Wise Up
Bear & Bull: What Do These Terms Mean For The Market And You
- By admin
- 02nd August 2022
“Bear vs. Bull”.
Sounds like an exciting match between two sports teams. Or it might bring up the image of a more literal fight between bears and bulls in your mind! We, however, are referring to the two different (read: opposite) phases and investment patterns of the stock market when we talk about Bears and Bulls.
What is the Bear Market?
In a Bear market, stock prices continue to consistently fall or are expected to fall over a period of time. As a Bear investor, you are expecting a decline in the current market prices in the foreseeable future. This is a risky market if one is selling or holding stocks that are losing value.
What is the Bull Market?
In a Bull market, the stock prices continue to rise over a period of time. So if you’re a Bull investor, you are investing with the expectation that the price of your purchased stock will increase in the foreseeable future. Investing in a Bull market offers investors some surety that their investments will grow over a period of time in the near future; the upward trend will continue in this setup.
Are you with us till this point? Pretty simple, right? Now that you know these two terms, you can better understand how to start investing in each of these markets, and what those investments might mean for you as an investor looking to save money or even make money.
How do the Bear and the Bull affect investors and our economy?
The Investors – Because the Bear and the Bull markets are fundamentally different, it is natural that the way you invest in these also varies.
The Bull market is raring to go. The Return on Investments (ROI) in the Bull market is potentially high, and early buys and quick sells can be beneficial to make the most of this market structure.
The Bear market is sluggish in its trajectory. Investing in this market requires a certain level of caution because you can be sure to incur losses in the initial stages of your investment. Fixed income securities offer a safe investment opportunity in a Bear market.
Takeaway – A good way to tackle the Bull and Bear markets is to stay on top of your financial planning at all times. It is also important to remember that market trends are highly unpredictable and volatile and cannot be timed as there are a number of factors affecting them.
While you cannot do much about the highs (bulls) and lows (bears) of the market, what you can do is approach investing as a long-term undertaking.
It is crucial that you diversify your investment portfolio, and take the time to understand the direction in which the market is headed, from the get-go; this will allow you to be better prepared for changing market conditions and safeguard your investments to some extent.
The Economy – Each company represented in the Indian stock market is a vital part of the Indian economy. Naturally, the state of the stock market (whether it is booming or wilting), has an impact on how the country’s economy as a whole is functioning.
Much like a sluggish bear, an economy driven by the Bear market can be categorized as slow-moving. In this kind of market, consumers are spending less and less, resulting in lower profits being reported by businesses. Ultimately an economy that is being driven by a Bear Market will see a fall in stock prices, higher rates of unemployment, and a declining GDP.
On the other hand, in an economy that is driven by a Bull market, consumers are readily spending. Increased wealth and confidence in market conditions become huge boosters in the economy of the country. Right from an increased GDP, to higher employment rates, and an increase in stock prices, the Bull market propels the country’s economy.
While you cannot do much about the highs (bulls) and lows (bears) of the market, what you can do is approach investing as a long-term undertaking.
It is crucial that you diversify your investment portfolio, and take the time to understand the direction in which the market is headed, from the get-go; this will allow you to be better prepared for changing market conditions and safeguard your investments to some extent.
What is the current scenario in India and how does it affect you as an investor?
Today, India is in a Bear market. The Indian stock market’s value is already down nearly 20% from its January peak of about $3.7 trillion dollars (Business Standard). One of the best ways to stay afloat in Bear market conditions is to start making long-term investments. Think of it like a Discount Sale!
In these kinds of market conditions, it is also prudent to stick to the staples – like the food industry for example – which are likely to stay at a stagnant value rather than lose their valuation in the market. Lastly, Bear markets present investors with the perfect opportunity to diversify their portfolios. This is the time to invest in fixed returns funds (such as the upto 10% returns fund offered by Deciml in which you can invest with as little as ₹1), which are less volatile and offer a continuous stream of cash flow for you.
