Great independent investors know how to capitalize BULL and BEAR markets when they arise!
As an independent investor, do you know how you can prepare for such events? One way is to train yourself to recognize patterns in the stock market. Keep reading to know how this particular discipline will help you adjust your investments accordingly should anything go wrong in the stock market.
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Great independent investors know how to capitalize BULL and BEAR markets when they arise! In our previous articles about The Independent Investor, we talked about the basic disciplines that you must possess to keep your investments steady. We mentioned the importance of making a personal commitment to maximize your wealth, controlling your emotions, balancing your investing style depending on your lifestyle and spending habits, and buying the securities that fit you. These disciplines are all equally important, helpful, and beneficial to you and your family as investors. … but do you know what you should do in case something goes wrong in the stock market? Well, if you haven’t thought about this yet, you should do so now because anything can happen any time! Here’s one investing discipline that will help you traverse these kinds of situations: CAPITALIZING ON THE BULL AND BEAR MARKET! There is a possibility that a major stock market collapse will happen… and this is not because something bad is going to happen that’s different from the past. A market collapse can happen because it’s always something that has happened in the past. In fact, the stock market has always shown patterns and cycles of the bull and bear market. This is something that has been consistent throughout history. To be a disciplined investor, you must be able to recognize these patterns when they arise and adjust your investment strategy accordingly. In the words of Peter Lynch: “You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” Let’s take a look at the origins of the Bull and Bear Markets… BEAR MARKET This term comes from bearskin traders who made bets that the market price for bearskins would fall. So, when the market price of bearskins fell, the “jobbers” or sellers would have already sold the products at a prior higher price. Then, they would buy bearskins to complete and deliver the promised order at a much lower current price. In other words, “sell high and buy low.” Falling prices are good for these traders. This kind of market is a good market for bears. That is why it’s called, “bear market.” BULL MARKET Alexander Pope is one of the most celebrated British poets and the first one to write about a bull being the opposite of a bear. In the early 1700s, a bull would have been a natural choice to oppose a bear… and throughout history, the bull is associated with Europe due to the Greek mythology story that Zeus took the form of a bull to court the beautiful Europa. Then, in the poem written by Pope, the desire to keep the bull and push back the bear has been clearly expressed. This became the reference to the bull stock market investing. Understanding bull and bear market patterns is necessary to buying low and selling high over long periods of time. In Sir John Marks Templeton’s words, “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” If you don’t capitalize on these patterns, you might end up like those investors who got caught up too late in the ups and downs of the market. Hope you’ve found this week’s insights interesting and helpful. Follow us on LinkedIn. Stay tuned for next Wednesday’s The Independent Investor! Learn more about how you can turn crises into opportunities with the help of investing discipline on next week’s The Independent Investor! |
