Bear Market

A Market is called a Bear Market when the Stock market falls for a prolonged period of time, usually by twenty percent or more. Any Market in which prices exhibit a declining trend with 20% or more fall then there exists a Bear Market. The Decline in the Stock prices is normally due to decrease in corporate profits or corrections of over-valuation (i.e. Stocks were too expensive and fell to more reasonable levels). Investors who are afraid by these lower earnings or lofty valuations sell their stock causing the price to drop. This action causes other investors to worry about losing the money they’ve invested. So they will sell as well. So here the Bear market cycle starts.

One of the best examples of a prolonged bear market is that of 1970's when gold stocks went sideways for well over a decade. Experiences such as these are generally what scare would-be investors away from investing. Ironically, this keeps the bear market alive; because no few buyers are purchasing investments, the selling continues.

The Two Fundamentals principles you have to bear in mind while you are in Bear Market. They are:

1.) A bear market is only bad if you plan on selling your tock or need your money immediately.

2.) Falling stock prices and depressed markets are the friend of the long-term, value investor.

In other words, if we invest with the intent to hold our investments for decades, a bear market is a great opportunity to buy. The principle amazes everybody as the principle is sell only after the market has fallen. The good time to sell when we are in bear market is before our stocks lose value.

3 steps decides things in Bear market

• Sit tight and let the market work through its problems.
  

• Take advantage of the price decline and add to your holdings if you believe nothing has fundamentally changed with the company.
  

• Sell before the loss becomes worse.
  

On 13^th June 2007, all indexes were doing their best and that day was called red-letter day. And the Dow achieved its best one day advance in this year 2007. But from the technical standpoint the markets continued to weaken. And earlier too the stocks have been much declining instead of advancing. All were expecting that there would be a chance of bear market cycle to start. But it is too early to tell if the bear market has started, because 13^th June’s stock market decline has reinforced the technical weakness in the market.

In my opinion rather than Bull Market, Bear Market is a safe place to stay in but provided we have a tight view on the markets.

http://beginnersinvest.about.com/cs/marketanalysis/a/031701a.htm

http://www.investorsadv.com/category/market-commentary/

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