What is a Bear Market?

by | Aug 2, 2022 | Resources | 0 comments

So what exactly is a bear market? Simply put, a bear market happens when there’s an extended period of price declines across the market. This could be attributable to major events such as a pandemic or a war. It could also mean that the economy is just weakening in general.

A bull market, on the flip side occurs when there tends to be a great deal of consumer confidence. Investment prices are on the rise, and there is generally low unemployment associated with a bull market. In some ways, a bull market is also considered a buyer’s market.

Remember, the market doesn’t necessarily have to be either a bull or a bear market. Markets tend to be constantly changing. There could be periods of moderate gains and also periods of small losses. With a bull market or a bear market, you are usually looking at a sustained period during which one of these prevails.

When Bear Markets Occur…

Historically speaking, the US has had more bull market moments than bear market ones. That said, it would seem that with the NASDAQ plunging, most experts concur that we are in the midst of a bear market.

For many investors, this is actually an optimal time to purchase stocks and publicly traded companies. That’s because in some ways, they can be had for a bargain in a bear market. Cyclically, a bear market is almost always followed by a stronger upswing or even a bull market. So if you can afford to invest in the midst of a bear market, you may find the payoff is an appreciable one.

Some Bear Market Dos and Don’ts

Given the current climate and market conditions, what are some prudent financial moves that you can make right now? This is with many investors and also those who may not be quite as well-versed in investing (but want to safeguard their money nevertheless) are currently asking.

Do assess your tolerance

How much tolerance do you have for risk when it comes to your money? If significant dips in your portfolio are incredibly worrisome, then you might want to rethink your investment strategy. Particularly, if you are closer to retirement age, you probably want to have more assets in lower risk investments. Also keep in mind, during a bear market, diversifying your portfolio is always a good idea.

Do try and buy low

There is an old adage: Buy low, sell high. The problem here is that those who are looking to invest tend to jump on the stock market bandwagon. That is to say, as stocks are ascending, people consequently feel good about those stocks and then put their money into them. The key however is to try to buy low.

Don’t ignore your long-term goals

What are your financial goals? In the short term, wanting to make a great deal of money given the market conditions makes sense. But ignoring your long-term financial goals could get you into trouble. Are you putting away money into a retirement account? Now might be a great time to make larger contributions to those accounts.

Don’t obsess about the market

Especially newer investors, they have a tendency to watch the market closely if not obsessively. It’s not only an act in futility, but it also affects your emotional state. Make no mistake about it, investing can be emotional for many people. And if you are constantly fixated on what the market is doing, you’re in for an emotional roller coaster.

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