Investor's perspective: What is the difference between a bull and a bear market?
Wallstreet has a robust arsenal of terms that it likes to throw around.
You have probably heard a TV personality, or so-called finance guru say things such as "the bear, or the boogeyman has taken over with no end in sight!"
Or you may have heard them say I am "bullish" on a particular stock. More often than not the commentator behind this fancy jargon never thinks to pause to explain what these expressions actually mean. Perhaps their aim is to impress you by speaking in terms that the majority of the population does not understand.
Or perhaps this is why so many innocent investors get pulled into investments that they themselves do not clearly understand. Stop the nonsense! Majority of the fancy Wallstreet jargon that gets thrown around is really not that complicated at all, and bull/bear markets are no exception. In fact, the meaning behind these expressions is actually quite simple.
Financial markets constantly rise and fall and this determines the state of the overall marketplace as bullish or bearish.
These two powerful animals rule the kingdom of the market place.
A bear market describes an environment where there is a widespread decline in the value of securities that causes a downturn in the stock market. Pessimism takes over and many investors begin to frantically sell their holdings as they anticipate steeper losses.
Generally speaking, a 20 percent or more decline in any of the major indexes such as the Dow Jones Industrial Average (DJIA) or the NASDAQ may indicate the beginning of a bear market.
A bull market basically demonstrates the opposite behavior of a bear market. A bull market describes an environment where there is a widespread increase in the value of securities that causes a spike in the stock market.
Optimism takes over, speculation begins to run rampant, and many investors begin to frantically purchase more stocks as they anticipate continued growth. Generally speaking, a 20 percent or more increase in any of the major indexes such as the Dow Jones Industrial Average (DJIA) or the NASDAQ may indicate the beginning of a bull market.
As an investor, it is very important to have a clear understanding of these two powerful animals and their distinct behaviors as they take turns dominating the marketplace. This will help you make suitable decisions in accordance with your investment strategy depending on the current market conditions.
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Disclaimer: Hudson Wealth Management, LLC (HWM) is a FINRA registered investment adviser firm. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and HWM's fee schedule. The information provided herein is for illustrative purposes only and does not constitute personalized investment advice, recommendations or solicitations to hold, buy or sell any investment or security of any kind. All images and return figures shown are for illustrative purposes only and are not actual customer or model returns. Past performance does not guarantee future results.
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