By Craig Erwin, Ph.D.
When we own stocks, we make the most money during bear markets, (but it sure doesn’t feel that way). Why do we make the most money during bear markets? Because we pay much lower prices for stocks during bear markets than in bull markets. What is a bear market? It’s when stock prices fall 20% or more from recent highs. I like getting 20% off the price.
Almost everybody loves bull markets, but why? As stocks climb higher and higher during a bull market, they get very expensive. Near the end of a bull market you often end up paying very high prices for stocks. During bear markets you get dirt cheap prices, so buy all the stocks you can during bear markets. If you buy during a bear market, when the next bull market starts, you will profit nicely because stock prices will shoot way past the cheap prices you paid during the bear market.
So, don’t get so excited about bull markets. During bull markets you buy high and hope prices go higher. During bear markets you buy low and hold on until the next bull market drives the prices of your stocks much higher, making them worth much more than you paid. Don’t be afraid of bear markets, take advantage of them. Buy all the stocks you can while everything is on sale. A bear market is a wonderful gift, which allows you to buy stocks at unheard of prices. Buy the bear!
Are you brave enough to buy stocks during bear markets? If not, why not? Are you more likely to buy heavily during bull or bear markets? Are you on track to accumulate enough wealth to retire?
For more information on bull and bear markets, investing, and building wealth, click on the following links: