Investment Tips: What Is A Bull Market?

When the Dow, S&P, and NASDAQ are in a sustained period of growth, the financial world and stock market heralds the arrival of a bull market.

Constant changes in the United States economy drive stock prices up and down. Numerous forces are at work in the stock market and include, but are not limited to, the supply versus demand for different securities, movements in interest rates by the Federal Reserve, particular stock interest, and the spending habits of common Americans. These factors may cause long term economic growth over an extended period of time. When this trend is observed, the financial world heralds the arrival of a "bull market".

A short term, low value, peak in market share prices is not enough for a bull market. For a true bull market, at least 20% of the stock market's value must be on the rise. This has to take place over time, possibly several months or years. Keep in mind that this is typically observed in the Dow Jones Industrial Market, the Standard & Poors 500 and the NASDAQ. The history of the stock market has been littered with bull markets, most notably in the 1920's, the late 60's and the late 80's. These are times when there is low unemployment, high job satisfaction, a boom in the production of goods, and low inflation. These events are often caused by an economic recovery, consumer confidence, or a positive investor psychology.

When one considers how to invest during such a time of economic boom, the old adage, "Buy low and sell high" is the mantra. Bullish investors will seek out options, stocks, or currencies that they speculate will gain economic value. They will buy into these options, stocks and currencies when they are at their presumed "low" and try to sell them off again when they reach their "high". This has been a successful profit making venture for thousands of investors who are wiling to do the research and take the risk of entering the marketplace. These bullish investors are the ones who believe that the market will continue its positive trend. It is also worth noting that the opposite of a bull market is a bear market, or a sustained period of economic decline.



A unique point of history is now in order. How did the bull market get its name? The most common, historical, explanation comes from the way in which a bull hunts its prey. When a bull charges and attacks, it attempts to gore its victim by a quick upward thrust. Thus a bull market is a market that is moving up. It also used to be common for exhibitions to take place in which bulls fought bears; thus the name for the market's opposite trend.

Understanding the concept of a bull market is essential in investing. Studying the trends of the marketplace is necessary before placing any money in a system based on speculation. Solid, quality investments should be the standard of any portfolio. There will always be risk takers, however. It is also good to keep in mind that the stock market has always, historically, posted a positive return in the long run.

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