Sunday, May 15, 2011

The Unintelligent Investor's Definition of the Week: Bull and Bear Markets

Bull and Bear Markets

Bull Market
Oxford Dictionary’s definition: a market in which share prices are rising, encouraging buying

Bear Market
Oxford Dictionary’s definition: a market in which share prices are falling, encouraging selling

Unintelligent Investor’s explanation

I guess this post is going to be quite short because these are really simple terms. When you say the market is bullish, you are basically saying that the prices of shares are going up. If you say it is bearish, you mean the prices are falling.

Bull markets are used to describe good times where most shares are going up and you can make money pretty much by putting your money in any company. This is probably especially obvious when the market is recovering from a recession. So remember, as beginners, we might be making money just because the entire market is bullish not because we are pros after being in the market for months lol.

A bear market is usually used to describe a recession. So if we’re making money in a bear market, we’re doing very well. In bear markets we should be happy if we preserve our capital and minimize our drawdown. Maybe an easier way to gauge how well we’re doing is to just compare our results to the indexes.

So anyway,
Bull = good, everybody is making money and is happy.
Bear = ohhh crap...

I don’t know if this is true but someone told me the terms bull and bear markets originated from the way they attack. Bulls thrust upwards with their horns and bears strike downwards with their paws. So there you go, interesting fact?

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Sigh, time to write some case reports..

Next post on Tuesday!

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