Bulls and the Bears are terms used to refer to investors or traders with a certain expectation or perspective of the market and where it is headed. If you haven’t heard of these terms yet, you soon will. In the financial markets, the bulls and the bears are locked in a constant and eternal struggle. An investor can be bullish in his or her perspective and the overall market can be in a bearish trend. Being one of these terms have nothing to do with making money, since a successful trader can make money even when the market is going down.
The Bullish Perspective
A bull market refers to a scenario where the economy is experiencing growth, the financial markets are expanding, gross domestic product is increasing, and new jobs are being generated. In such a scenario, everything is great, hence, picking companies to invest is also extremely easy as most of the shares are appreciating due to the positive outlook of the market.
However, nothing lasts forever, and that principle applies to the market as well. A bull market will most of the time be followed by a bear market. A bullish scenario can be dangerous as the gains rack up investors and traders can get over-optimistic and overlook if a share gets substantially over priced.
The Bearish Perspective
A bear market is the complete opposite of a bull market. It is a market when the economy is contracting and economic recession is being experienced. In such a scenario, the financial markets will be falling, for example, the financial crisis of 2007 where a huge number of people were laid off. Despite all the negativity in the economy, traders can still make money off the financial markets using a technique called short selling. Another common strategy is to purchase new stocks after the markets have significantly depreciated, and almost all stocks are available at a discounted price. Those with a pessimistic outlook on the market, meaning they are expecting the market or market price of a share to drop are called bear or being bearish.
Aside from the bears and bulls, there are those who only invest in safe investments such as savings deposits. Although it’s true that you shouldn’t invest in something which will ultimately keep you up at nights, but you will also never see any real returns if you never take any risks. Whether it’s the financial market or simply starting your own business, there are always risks and effective risk management is the key to investment success.
There are another lot of investors who are referred to as the pigs. These individuals are mostly involved in high risk investments in their attempt to find that one payoff in a short amount of time. While it is true that most high risk investments have the highest payoffs, but seeking immediate gratification is the best way to lose all of your investments. If one is to be successful in their investing activities, they must shed or restrict their emotions during their decision making process.
There is a vast variety of investment strategies and styles. Making a profit is less dependent upon the style of investment but rather on the due diligence and informed decisions. Always remember that both bull and bears make money based on the economic cycles, even the low risk investors also make money. But the pig always gets slaughtered in the end.