Bear & bull markets are the yin & yang of an investment cycle. In the simplest of terms: bear = down / bull = up. So when someone says we’re in a bear market it means the markets are down. When we’re in a bull market the markets are up.
Generally speaking, a bear market happens when major indexes like the S&P 500, which tracks the performance of 500 company stocks, & the Dow Jones, which follows 30 of the largest stocks, drop by 20 percent or more from a peak & stay that low for at least 2 months. A bull market is defined as a period of consistently rising stock prices like the one we're in now.
What do bear & bull markets have in common? Both are inevitable. So you & your portfolio must be prepared to make the most of either.
Aggressive growth investments, like small company & emerging market stocks, might up some big gains during rallies. More conservative holdings, like investment grade bonds & treasuries, should help preserve your wealth during downturns.
Another thing bear & bull markets have in common is that they're unpredictable. That's why you want a well diversified portfolio, with a wide variety of stocks, government & corporate bonds, which can hold up through any type of market swing.
Your mix of investments should depend on your own personal goals & your level of risk rather than where you think markets are headed. That way you'll be ready for whatever may come next.
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