Bull vs. Bear Markets: What They Mean for Your Investments
Have you ever heard someone on the news talking about a "bull market" or a "bear market" and wondered what they mean? These confusing finance terms can make investing seem complicated, but they're actually quite simple when explained clearly.
At InvestCatapult, we believe everyone deserves to understand financial language without the jargon. Let's break down these important investment terms into everyday English that anyone can understand.
What is a Bull Market?
A bull market is when share prices are rising, and people feel good about investing.
Think of it like this: when a bull attacks, it thrusts its horns upward. That's why we use "bull" to describe markets that are going up.
During a bull market:
Share prices keep going up.
More people want to buy stocks.
Companies grow and make more money.
People feel confident about the future.
Jobs are easier to find.
Bull markets can last for months or even years. The UK stock market had a strong bull run from 2009 to 2020, where share prices went up by more than 100%!
What is a Bear Market?
A bear market is the opposite - it's when stock prices are falling, and people feel worried about investing.
Why a bear? When a bear attacks, it swipes its paws downwards. That's why we use "bear" to describe markets that are going down.
During a bear market:
Share prices keep dropping.
More people want to sell stocks.
Companies might struggle and make less money.
People feel scared about the future.
Jobs might be harder to find.
A bear market officially happens when prices fall by 20% or more from their highest point. The COVID-19 pandemic caused a bear market in early 2020, when the UK's FTSE 100 index dropped by about 33% in just one month!
How Should You Invest in Bull and Bear Markets?
During Bull Markets:
It's usually a good time to buy shares.
Your investments will likely grow in value.
You can take a bit more risk with your money.
During Bear Markets:
Shares are cheaper to buy (like a sale at the shops!).
It might be a good time to keep adding to your investments regularly.
Focus on strong companies that will survive the tough times.
Don't panic and sell everything - that's often the worst thing to do.
Tips for New Investors.
Think long-term: markets go up and down, but over many years, they tend to go up overall.
Keep investing regularly: whether it's a bull or bear market, putting in a little money each month is a smart strategy.
Diversify: don't put all your money in one company or one type of investment.
Stay calm: when markets drop, it can feel scary. But history shows that they recover eventually.
Start small: you don't need lots of money to begin investing. Many UK platforms let you start with just £25 per month.
Learn the basics first: understanding terms like 'bull' and 'bear' markets is your first step to investment success. When you hear these terms on the news, you'll know exactly what they mean.
Use tax-efficient accounts: in the UK, consider using an ISA (Individual Savings Account) for your investments. You won't pay any tax on the profits you make, which means more money stays in your pocket.
Ask questions: don't be afraid to ask questions when something doesn't make sense. The financial world is full of complicated words, but good investment platforms will help explain things clearly.
Remember This
The stock market is a bit like British weather - it changes all the time! Bull markets (going up) and bear markets (going down) are just natural parts of investing.
If you're investing for your future, you'll see both types of markets many times. The key is to have a plan and stick to it, no matter what the market is doing today.
Making Finance Easy to Understand
The world of investing is full of confusing terms like "bull markets," "bear markets," "dividends" and "portfolios." But don't worry - they're all just fancy words for simple ideas.
At their core:
A bull market means prices are going up (good times).
A bear market means prices are going down (tough times).
By learning these basic terms, you're already starting to crack the code of financial language. .Understanding these simple concepts - bull and bear - will help you make sense of financial news and feel more confident about your investment decisions.
Remember: no one is born understanding financial terms. Even expert investors had to learn these words at some point. You're taking an important step by learning the language of money in clear, everyday terms.
If there are any terms and words that you’d like explained, we’re happy to help; just tell us what you’d like to know about by contacting us at info@catapultfintech.co.uk.