bull market nonsense
Website design By BotEap.comWhen investing in the stock market for the first time, you will most likely hear about two types of markets: bear and bull. A bear market is one that is typically headed down, with negative activity and poor forecasts. The contrasting bull market is one headed to the upside, with positive forecasts likely. The natural reaction to a negative bear market is not to invest, whereas in a bull market the reaction would be to follow the crowd and invest your money. However, this mindset is paradoxically illogical, and this article will explain why.
Website design By BotEap.comOne of the most spectacular bull market booms and busts in history was the burgeoning dot-com bubble in the late 1990s, followed by its spectacular crash from March 2000 to October 2002, in which some $5 trillion was withdrawn. dollars worth of stocks and technology stocks. What apparently happened in this case was overwhelming speculative sentiment about the potential of the Internet, with hundreds of companies springing up with similar business plans and securing investments. Venture capitalists saw the rise in these stocks and were eager to get in on the action quickly, bypassing the normal restrictions and precautions, while driving the stock’s value even higher. As more and more people jumped on the tech bandwagon, prices skyrocketed until the bubble finally burst, destroying the value of many people’s investments.
Website design By BotEap.comThe Dotcom bubble is a classic example of when bull market sentiment gets completely carried away. Prices went up, more and more people jumped on the bandwagon, which caused prices to go up, and then prices crashed. When times start to improve and you see other people making a fortune, it’s easy to be seduced by sky-high prices. However, imagine that you invested in the NASDAQ around its March 2000 peak of 5,000 points. In almost two weeks, you would have lost 9% of your investment, while in a year it would have lost 50% of its value.
Website design By BotEap.comThe thing to learn about bull markets is that it’s hard to know when it will run out. The key is not to go with the flow of the market and invest in times of rising prices. If you were to buy when it goes up and then sell when the market starts to go down, you would be following the illogical investment policy of buying high and selling low, which leads you to lose money. Instead of this strategy, watching booming markets closely and waiting for the moment when they run out and start to fall is a better strategy. When stocks become overvalued, as tech stocks did in the dotcom bubble, they will inevitably burst, but buying after a crash could lead to securing a bargain. Buying during ‘bear market’ periods is therefore a more likely way to find a buy low, sell high strategy.
Website design By BotEap.comIf you’re looking to invest, the current bear market in stocks indicates a good time to buy. Warren Buffet, the world’s richest man largely due to his investment strategy, has said there has never been a better time to buy US stocks, while in the UK the FTSE 100 is only worth 60% of what it is. which was at this time last year. If you want to learn more about investing, take a look at General and Legal Matters.