Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Bear

What it is:

A bear has a negative outlook on the market (belief that the value of an asset or market will decrease).

How it works (Example):

Investors generally fall into two mindsets: those with an optimistic outlook who foresee prosperity, called "bulls," and those with a pessimistic outlook who foresee decline, called "bears."

A bearish investor will alter their portfolio strategy by liquidating securities they believe are going to lose value in the foreseeable future. A bullish investor, on the other hand, believes securities will continue to rise and would continue to invest long in securities.

Depending on an investor's outlook, they could change from a bear to a bull or vice-versa.

Why it Matters:

Market perceptions can affect securities prices depending on how many bulls or bears there are in the market. This is best expressed by the bull/bear ratio. In either case, bulls and bears can impact the direction of market movements as a result of the investments they make.

If you're having difficulties remembering the which animal describes what, just remember: A bull attacks by thrusting his horns in an upward movement, while a bear attacks by swiping his paw in a downward movement. Therefore, if the market goes up, it's a bull market; it the market trends down, it's a bear market.

For more details on the history of these words, read The Quirky And Brutal Origins Of The Terms 'Bear' And 'Bull.'

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