How to Make Money During Bull And Bear Markets?

Bull and bear markets are both part of the stock market, and any long term investor in stocks will see both of these markets come and go alternately. It is possible to make money and trade successfully no matter what the market is doing, by following some sound principles. One of these is to buy only quality stocks. Investing in quality stocks which are sound and solid will help your portfolio hedge against losses. Quality stocks should be your aim regardless of whether there is a bull or bear market. A bear market is generally defined as when the stock market falls more than the previous high point by at least twenty percent. A bull market is the opposite, and market prices go up substantially.

There are some strategies that should be considered during bull and bear markets. If a bear market is starting, look at your investment portfolio carefully, and determine the risks each investment poses if the market falls. Growth stocks may suffer the most during a bear market, so it might be a good investment move to sell growth stocks and replace them with value stocks during a bear market. This is because growth stocks are based on profits, both those made now and in the future, and that is where the value of the stock is determined. If profits fall, so does the stock. Value stocks on the other hand may actually do better than the market, because they have lower risks, are not based simply on profit, and have higher stability in a bear market. Dividends are another bonus with value stocks, and this is added return to your investment. Value stocks do well in a bear market, and may even go up when other stocks are taking a nosedive.

Making money in bear and bull markets means using solid strategies and techniques to minimize loss and trade successfully regardless of market conditions. Some strategies may work better in one market or the other, but a good investment will not usually lose underlying value even in a bear market. The market price for the shares of stock may drop, but as long as the company is solid and high quality, the investment will go back up.

During a bull market, buying early and selling high is a common goal for investors, and this may include you. But make sure that even in a bull market your investments are in solid companies that have value. A bull market increases the odds that you will make a profitable and successful investment, because the market on a whole is normally going up during these times. Getting in on the ground floor, right before prices rise, is important, but this does not mean you have missed out if the price has started going up. Even if the price has gone up some, a bull market means it may go up even further.

In a bear market, quality stock investments become more important, because prices are falling. The chance of losses on a bear market are higher, because of the dropping market and stock prices. It is impossible for you to tell when the bear market will end, or when the market has reached the very bottom. A bear market can provide some opportunities for those willing to take some risks though, because if the stock price has reached bottom and the company is solid it is a perfect time to buy. Some experts are predicting that there is a secular bear market right now. A secular market is one which extends at least five, and up to twenty, years. If this is true, then it is twice as important to be able to make money during a bear market, because it may last for years to come.