trading stocks

The Bear and The Bull: A Story of Money, Investment and Risks

By: jlucy668

Even though you have not been in touch with trading stocks for long, you may have already heard about the “bull market” and the “bear market”. When the stocks are going up in value, it is usually a bull market and what follows is a fall in the prices of the stocks, and that’s a bear market. That sounds a bit too simple and generic, that’s because it is. Therefore, economists and analysts have laid down a few rules of the thumb that can better define the terms.

Redefining the bear and the bull

This redefines the bull market as the market period when the stock prices have increased by at least 20%, and the bear market is when the prices are down by at least 20%. Even with the statistics and the software programs to predict market prices, it is quite impossible to predict a bull market. The factors that drive the market prices are a few more than many. It can be related to tech booms or wars or even housing prices. The case is similar for bear markets. This makes stock investment quite the risky game.

How long can a bull market last?

There is no typical time limit for a lasting bull market. The one we are in currently began in 2009, and we are in the ninth year. The prices have been on the rise since the last bear market ended back in March 2009. This is the second longest bull market in the record with the annual return for a 10-year investment of 7.6% only. Irrespective of what haters say, the market is growing stronger every day. Just because it is slowing down, it is no cause to believe that it is ending soon. As per the history of UXC Share Prices average bull market can last at least 5 to 8 years. According to some experts, some bull markets have the potential to ride it out for almost 14 years.

Is the current run of the bull coming to an end?

2017 has been a rewarding year for those investing in the stock markets. Although, all signs point towards a market slowdown, it does not mean it is time to sell! As per the price to earnings ratio metrics, which is also Robert Shiller’s favourite, the market prices have been the highest since the dotcom bubble of 2000. The stocks are near twice the price of their initial values, and even then, expert economists do not believe that an all year price high does not signify the highest prices for stocks in the recent future. The stock prices may seem expensive, but there is no sign of tumbling just yet.

How to understand the tendencies of a bull market?

Interestingly enough, one of the sure signs of bull market health is investor skepticism. As long as the investors are sceptic about buying more and holding, the market will perform well. This usually happens because as the market climbs, the investors invest more on beta-stocks to make up for losses in case the prices tumble. This is quite the smart move since the stock market prices tend to move in circles. During the bull market, volatility is more and people are more likely to benefit by investing in riskier stocks and shares.

How to prepare for the oncoming bear market?

After a long run of the bull market, it is time for traders to prepare for a bear market. Only after the prices of stocks in a bull market reaches a plateau, the prices start declining, and the smarter traders start selling before the sharp decline. The bear market is the time to turn towards safer investments. Investors need to adjust their share trading portfolio to the bear market.

The biggest change you need to make during an oncoming bear market is the percentage of bonds in your portfolio. Bonds have a lower probability of losing money than stocks during a bear market. As the stock market declines, the tendency to invest in bonds should increase. They pay regular interests, and they provide a steady stream of income for professional as well as amateur traders.

Another strategy that can prove to be fruitful is the blue-chip stocks strategy. Investing in blue chip stocks when the prices are falling and volatility is high can be rewarding in the long run. These stocks are better at handling oncoming downturns in the market, and they offer bulk advantages in a rather uncertain economy.

What’s the message?

In the current economy, it is smarter to invest more and take a little more risk. Load up on more stocks and diversify your trading profile. Basic commodities, consumer discretionary and energy usually perform well in a bull market.


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