Skip to main content

Risks and rewards of bull market


Bull market is market trend when price of assets or securities rise by 20%, an opposite from bear market. The term bull market is usually used when talking about securities but the term applies to anything that can be traded, real estate, currencies and commodities. During bull market all three major stock indexes, S&P 500, Nasdaq and Dow Jones Industrial Average rise. Bull market happens in healthy economy and is characterized by investor confidence and optimism. The term can be also applied to investors, ones that have optimistic view of the market is called bull or bullish. On the other hand investors with pessimistic view of the market are called bears or bearish.

Natural rise and fall of economic growth over time is known as business cycle and it has four phases: expansion phase, peak, contraction and through. Bull market happens during expansion phase when economy is growing with strong GDP, with drop in unemployment and strong corporate profits. In stock market there is increase in IPOs, positive demand and raising investor confidence. Investors behavior is influenced by national economic data, corporate financial performance and global economic concerns. It is not always easy to predict change in trends because not all factors are measurable for example market interpretation especially because psychological effect and speculation is often involved.

Investors use different strategies to take advantage of bull market. the point is to buy early and wait for the asset or security price to reach peak and then sell. In practice it is not so easy to time the market. Buy and hold strategy has proven it efficiency  and during bull market some investors might use increased buy and hold strategy when investors add as long as the price is rising and buy additional stock for every increase in price. Economy and stock market don't move in straight lines so even during bull market there are few drops which some investor use to buy stock at discounted price. Others take aggressive approach trying to squeeze maximum gains. 

During later expansion phase  of business cycle irrational exuberance and creation of assets bubble can happen. This happens when investors bid prices above underlying value and they are not supported by an underlying demand. Eventually bubble will burst and prices will fall. Even during bull market caution is needed, avoid herd mentality because belief that prices will rise forever is just mot possible.
Labels:

Comments

  1. DariyaFebruary 18, 2020 at 10:36 PM

    nice information thanks for sharing valuable content with us we also provide great information related to your blog feel free to visit our Asset management companies website.

    ReplyDelete

Post a Comment

Popular posts from this blog

OTC stocks more difficult to trade and deposit

  Mina Mar Group helps micro-cap companies structure their growth. Micro-capitalized companies are those with less than $50,000,000 in equity, sometimes under $1,000,000. Restructuring involves raising money (both debt and stock), and planning how they will eventually harvest that wealth. If you’re a founder or investor, the secret to harvesting your equity is to possess assets with a developed market for their sale; up until recently, that market was the public market. Now, Over-The-Counter Securities (“OTC Securities”) don’t serve that purpose since, unless you’re a tech unicorn doing an IPO, there are essentially no ways to sell the shares you’ve invested in. OTC securities – how they were deposited five years ago. Brokerages all around the country have tightened compliance over the past five years to the point where no one may deposit share certificates into their brokerage accounts, even if they can prove that they paid for them. Consider the following demand from a secondary ...
Post a Comment
Read more

Understanding financial statement

The financial statement is a written record of financial activities that gives an overview of financials results and conditions. Financial statement has three basic components: balance sheet which is an overview of assets, liabilities and equity on a particular date, income statement shows net income of the company during a set period of time and cash flow statement which shows inflow and outflow of cash caused by company's activities during stated period of time. Financial statements are often audited to ensure accuracy for tax, financing and investing purposes. Balance sheet reports your net worth at a particular point in time; you can understand it as snapshot in time, usually at the end of the fiscal year. It summarizes all financial data in three categories, assets, liabilities and equity. Assets are tangible objects of financial value owned by the company. Liability is debt owed to a creditor and Equity is a net difference when total liabilities ...
Post a Comment
Read more

The Bad Actor rule of Regulation D

On July 10, 2013 the Securities and Exchange Commission adopted bad actor disqualification provision for Rule 506 of Regulation D under Securities Act of 1933, to implement Section 926 of Dodd-Frank Wall Street Reform and Consumer Protection Act. The disqualification and related disclosure provision appear as paragraphs (d) and (e) of Rule 506, of Regulation D. The Bad Actor rule prohibits company (the issuer) to use registration exemption if the issuer or any other associated person has been convicted of or subjected to judicial or regulatory sanctions for certain violation of U.S law. Exemption from registration under Regulation D helps thousand of businesses to raise capital worth billions of dollars. T he “Bad Actor” rule is codified as new paragraphs (d) and (e) to Rule 506.  Rule 506(d) provides that the exemptions in Rule 506(b) and Rule 506(c) are not available if the issuer or any associated person is statutorily disqualified. This includes all of the following: ...
Post a Comment
Read more