bull market vs. bear market

One is a bull market, where prices for a particular group of securities are rising or are expected to rise. It is a prolonged period in which the investment increase prices faster than their historical average. In such times, investors have confidence that the market will continue to rise in the long term. Bull markets can happen as a result of the economic recovery, an economic upswing, or the psychology of investors.

A bear is opposite of a bull market, but is characterized by falling prices and an expectation that they will continue to decline. If the market is bearish, it leads to a slowdown of the economy together with a rise in unemployment and inflation. In both cases, people will invest. These invest in a rising market and believe that it will still be called as bullish investors over those who trade in falling markets and think that it will still be as well known as bearish players.

Although bull and bear market conditions through the direction of stock prices, there are several other features associated with these markets. However, one should bear in mind that the characteristics described in the following sections are not fixed rules for typifying either bull or bear market and give only a general idea to identify the market. In a bull market, there is a limited supply of securities and a high demand for the same. This is because few are willing to sell because of the rising trend of the market, they expect to grow further. As a result, stock prices soar high, as investors compete to buy the available equity. In contrast, a bear market has more sellers and fewer number of buyers. Bull and bear markets are heavily influenced by the psychology of investors. It is the tendency of investors to buy when the market increasing, in the hope to get more profit out of it. This leads to high prices and the continuation of the trends. If the market prices fall, he shook investor confidence and he starts to move his money from shares and begin sales. This leads to a further decline in prices. As for the economy, stock market and economy are strong. The companies whose stocks are trading on the stock exchanges are the participants in the larger economy. A bear market is associated with a weak economy, as most companies are unable to large profits, because consumers are spending not nearly enough-this fall in profits, of course, has a direct impact on the way the market valued stocks. In a bull market, the opposite occurs as people have more money to spend and are prepared to spend, which in turn, drives and strengthens the economy. To be considered a bull or bear market is supposedly a step in the direction for a longer period. Small, short-term movements do not qualify. Bull and bear markets mean long movements of considerable proportion.

There are several well-known bull and bear markets in American history. The longest term bull market was the one that began in 1991 and ended in 2000. The most famous bear market was, of course, the Great Depression. The Dow Jones Industrial Average lost about 90 percent of its value in the first three years of this period.

There are no fixed rules for investments in the bull or bear markets, but in a bull market the best thing to do is to take advantage of rising prices and purchases of securities early, to watch as the prices rise and when they leave their peak achieve sale. Although its not possible to predict with certainty when prices reached their peak or down, investors tend to make profits in a bull market. This is because on the whole investors have a tendency to believe that the market would rise. As prices are rising, any losses are too small and temporary. Portfolio with a higher percentage of shares can work well when the market rises.

Bear markets are complete opposite of bull markets. The chances of the losses are greater than the prices here are steadily declining, and the end is not in sight. Investment in the markets can carry a variety of different strategies. These include investment in the less volatile fixed-income securities such as bonds or money market securities. Another strategy is to employ investors to wait until the prices down is to be reversed. Some investors also turn to "defensive shares", whose performances are only minimally affected by trends in the market. The food industry, utilities, collection and telecommunications are popular defensive shares. But even here there is no guarantee that the defensive shares is also a market. Bear markets are characterized by short sales. Short selling occurs when investors believes that the prices of stocks are declining, or he believes that the shares are overvalued, or because there are some fundamental problem with the company.

Finally, I would say it is certainly no way to predict bull or bear markets. Investing in both involves risks, and that is why investors should invest their money in the quality of their investments. It is also important that an understanding of markets and education at the trends. Since the bull and bear markets have a major impact on investment. There are many methods, the investment of investment professionals, such as cost an average of U.S. dollars, selling short and diversification. The understanding of these strategies justified certainly improve the chances for a better balance in both markets.