The bear market and the bearish investor

Where there's a bull, there's also a bear. A bear market is the opposite of a bull market. It generally describes a prolonged period in which shares prices move downwards. Usually, it is a reflection of widespread investor pessimism in the stock market. An example of a “bear market” was during the Asian financial crisis when the share prices went down tremendously and remain low for a quite a long time.

A “bear” market earned its name because bears tend to swat at things with their paws in a downwards motion.

Bears are also cautious animals and they rarely move fast, unless they are after something. So a "bearish" investor will not quickly put in their money in the market. They will wait for the downwards trend of stock prices to subside before they start investing again.

   

Investing in the bear market

For investors that look for capital gains, a bear market can disrupt their investment strategies. In a bear market, there are greater chances for share prices to lose value significantly, even in a day, which could result in significant losses to investors. Nonetheless, there are investors that see a bear market as an opportunity to buy “blue chip” shares at a lower price. Usually they are long-term investors and will buy shares in companies that could provide good and consistent dividends. At the same time, they will invest in bear market to take advantage of the ringgit/dollar cost averaging.

Since there is no sure way to predict a bull or a bear market, it is always a safe bet for stock market investors to always have investment strategies to cater for both market conditions. Prudent and knowledgeable investors would be able to take advantage of opportunities presented by the bull and bear markets.
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