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Investing 101: Bull and Bear Markets

Forget March’s lion and lamb, let’s talk about bull and bear markets.

You may have heard the terms “bull market” and “bear market” but were unsure of what these terms mean. If you didn’t know, these animals’ characteristics are linked to the kinds of markets they describe. Bears are thought of as being lumbering and slow (despite the fact that they do attack). And when you think of a bull, perhaps you imagine it snorting and getting ready to charge. So a bear market is one that is slowing down while a bull market is one that is on the rise.

Investopedia cannot give the precise origin of these animal descriptions but it does have some possible explanations:

  • It is possible that these market descriptions are directly linked to how these animals attack, “a bull will thrust its horns up into the air, while a bear will swipe down.”
  • Those who sold bearskins “would speculate on the future purchase price of these skins from the trappers, hoping they would drop” making is possible for trappers to make more money when the selling price was set in their favor.
  • In times past, people staged bear and bull fights and the animals were thought to be opposites.

As an investor, it helps to know what kind of market you are facing. Bull markets are exciting because things are looking up and most stocks are doing well. But of course, the market does not stay “bullish” indefinitely. In a bear market, the economy falters and stock prices fall. Some people have techniques they think will help them profit even during a downturn. Others decide to wait for the bear to become a bull again.

Rather than getting scared in a bear market or being too enthusiastic during a bull market, you can invest continually. With the stock market, it helps if you are able to remain invested for a long period of time as the market fluctuates instead of expecting to make money quickly.