Investors need to know their bulls from their bears but if you are new to stock markets, what do the terms mean?
Finance and investing is shrouded in jargon, and talk about bull and bear markets is part of the mystery.
Identifying when the market is bullish or bearish is all part of managing a portfolio.
A bull market is when the economy has a feel good factor.
Jobs are easier to come by, wages go up and the economy is growing wealthier, which is demonstrated by an improving gross domestic product.
Risks and strategy
Generally, everything is trending up and investors tend to have an optimistic outlook.
But all good things come to an end – a bull market cycle is one of them.
The danger for investors is a commodity or shares become overvalued in a bull market and prices rapidly collapse when the market adjusts.
A bear market is the opposite of a bull.
Financial markets are shrouded in gloom, share prices are falling, economic growth slows and may even drop into recession.
A typical bearish strategy is to try to anticipate the end of a bear market cycle and buy stocks while they are at their cheapest, in the hope their value will increase during the next cycle – a bull market.
Bulls and bears are not the only ‘animal’ qualities of investors.
Don’t forget the chickens and pigs
Chickens never invest because they are scared of losing their money. No one should ever overstretch their investments and should certainly never stake money they cannot afford to lose, but chickens don’t even go that far.
Pigs are the opposite of chickens – they will risk everything on one risky opportunity to make a stock market killing.
Sometimes it’s said bulls and bears make their profits from the failed investments of pigs who rush in where others fear to tread and generally lose their money.
The saying goes: “Bulls and bears make money, but pigs just get slaughtered.”
Most experienced investors would argue drip-feeding savings into the markets over months or years is better than staking all during a bull or bear because the higher and lower share prices at different points of the cycle balance out.
Predicting highs and lows is gambling, but regular saving over time gives regular growth.
