Companies issue stocks/shares in order to grow. By issuing shares, a company is able to raise the required amount without going into debt. People buy stocks to get profitable returns thereby supplying the necessary funds to the company that helps in its growth. However, it is quite necessary for an investor to know what stocks to invest in. A good investor should know how to make profit both from bearish and bullish stock market, that is, when the prices of shares go down and when it increases considerably.
Bullish and bearish stock market
The terms “bullish” and “bearish” are quite common to a stock market investor. Before understanding the significance of these 2 terms in relation to share market, you should know that both of them describe long term trends and not short term changes in the stock market. Usually, bullish and bearish stock market is measured in terms of years.
Go through the following lines to about these 2 types of stock market in details.
• Bullish stock market
It is said to be a bullish stock market when the prices of stocks increase. It is a seller’s market as you can sell your shares and earn huge profit. It goes without saying that investors are quite positive in a bull market. When the businesses make profit, the investors can demand their respective shares of profit. However, the supply of shares is comparatively low as no one wants to sell their stocks. The share prices continue to rise as the competition increase in order to purchase the desirable stocks. At this time, investors prefer to take more risk as they expect much higher returns on their investment.
• Bearish stock market
As mentioned earlier, a bearish market is a declining one. During this, consumers tend to spend less that results into relatively low business profits. This in turn, devalues a company’s stocks. There is a general tendency of the investors to sell their shares before the prices go down, even more. By doing this, they want to minimise the loss. In such a situation, the investors also don’t want to take risks by purchasing stocks.
However, bearish and bullish stock markets are actually the 2 sides of the same coin. A bearish market is usually followed by a bullish market. Therefore, a successful stock market investor should know how to take advantage of both the situations.
Investing in these 2 market conditions
If you want to make money in a bullish stock market, then you should recognize the stock market trend early and be a smart buyer by purchasing the required number of the shares that you can sell later. Similarly, in a bearish market, you can borrow shares, sell them and wait for the prices to fall more. When the price goes down, you can purchase the same shares at relatively less price thus making a profit.
It is advisable that you don’t make your investment solely on the basis of bearish and bullish stock market. Instead, research well and look for shares that have growth potential. Over time, you’ll be able to invest in winning stocks that can yield profitable returns in future.