Pablo Luna
@m_b_m
There are variations of markets you should learn about in the trade industry, especially when looking for the perfect opportunity. Among them is the bear market, where some people think its occurrence is the best time to invest. Before diving into why you should ask yourself what do you know about its definition? And why is it named after a bear?
To start with, when you think of a bear, the way it attacks its prey is by dragging and throwing them downwards. When you apply it to the market concept, it is pretty similar. In its definition, a bear market’s essential characteristics are its falling prices within a particular time. There is a downturn of more than 20%. And yes, it benefits you, but how? Why is it ideal?
1. Lower Prices
In this type of market, there is a decrease in the prices. When this happens, investors are taking it as a chance to profit from short-sell activities. In which they buy their investments at a low price and sell them at a higher rate. For instance, you are on a waitlist for a stock or ETF to have its discount, during the bear market, it is the perfect time for you to take advantage.
However, it will help if you determine which stock is good and which is the bad one. According to the brokers from https://www.trusted-broker-reviews.com/octafx/, the first may decline but recover and find its way back on track. In contrast, the latter tends to stay down continuously. Thus, decide correctly to benefit from sales, profits, outlooks, all at a bargained price.
2. Dollar-Cost Averaging
In dollar-cost averaging, you consistently maintain your investment amount on several markets, which leads to more stable and accelerated returns over-time, neutralizing fluctuations. But how is it related to the bear market? Since it involves dropping stock prices, it is most advantageous to practice this strategy by doubling the profit you gain during the said period.
For example, when you regularly invest $500 a week, you have fewer shares at a high price. But if the said market takes over, you will have more claims at a discounted price. So, when a particular stock of your liking drops down to $250 this week, you can buy 2 of them. But when the prices go back its original state, you can only acquire one. Nevertheless, you win extra gain.
3. Advantages Against Your Competitors
This market is pessimistic that most people panic and make mistakes on how they choose to spend their funds, like aggressively selling out stocks. In the business field, everyone is competitive, including you. When there is a door for you to take out possible competitors, you walk straight right through it. That is the reality in this industry. Check The motley fool vs. the street as it can provide you financial news and other investment services.
Think about it deeply, when you are not as affected as others and hold on to your stocks, you thrive and depend on the brighter side of the recession. You quickly have the advantage. A bear market is your key to eliminating competition with the appropriate strategies, such as dollar-cost averaging.
4. Value Investing
One of the strategies you can have best in times of bear market is value investing. It is all about determining the stocks based on the operational ability and long-term capability to generate enough earnings. With this, when you actively participate in the market, since you are part of corporations likely to have the endurance for decades, you also continue earning.
Even when almost everything is declining, as long as the business you invest in operates, you are safe. It simply means you can take it as a chance of risking to acquire more assets under your name without having to venture into the possibility of suffering from severe losses.
5. Learning Experience
One of the reasons you should actively trade during bear markets is that you learn a lot. When you have a millionaire mindset, you know that this event, although it is a negative impact, does not mean you will also take it that way. In this market, once you learn how to persevere and be patient until you recover the decline’s severity, you will have base experiences for the future.
Bear markets are hard to predict, and you cannot possibly know when they will directly hit. It is why enduring the same environment prepares you to face what is yet to come. Imagine, when you equip yourself with the experience and expertise around this market, it is almost impossible to drag you down with the same circumstance because you survived the first one.
6. Risk Tolerance
Like the section above, it allows you to know how much risk you can tolerate. What is its relevance? Now that you are aware of how much you potentially gain and lose in this market, you can now adjust your investing strategies, accounts, holdings, assets, and stocks accordingly. In doing this, the anxiousness will no longer overwhelm you.
And it is a good thing because how you feel directly affects your financial decisions. Having a clear mind on handling these issues, without panicking or letting fear of bankruptcy devour, will have more stability with your investments. Hence, allowing you to produce more money.
