Bear Market

What is Bear market..?

Simply put, Bear market refers to a specific condition wherein the prices of securities start going through a decline, eventually resulting in widespread pessimism across the market because of negative sentiments being self sustaining.

As most investors start anticipating financial losses in a bear market while selling continues, pessimism keeps on growing with time. Even though figures usually vary, for many, an overall downturn of 20 per cent or more across multiple broad market indexes (including Dow Jones Industrial Average – DJIA, or the Stadard and Poor’s 500 Index – S&P 500 and such), over a minimum of two month period, is deemed the arrival into a Bear market.
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However, remember that a Bear market should not be confused with a correction which happens to be only a short term trend that seldom lasts over a couple of months. Also, corrections are usually a great value for a value investor to find an entry point, Bear markets do not always provide great entry points – primarily because timing the bottom is often a Herculean task to accomplish. Apart from that, fighting back is often pretty dangerous considering how it is extremely difficult for an investor to make stellar gains during a Bear market (assuming he or she is not a short seller).

Edited and Updated 13th January 2014

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