The bull vs. bears markets ratio

What is a bull market?

Investors call a bull market a time of optimism when asset prices are going up – like a strong bull charging ahead. 📈🐂

Economists define the bull market as a time when one of the major stock market indices (S&P 500, or similar) is gaining 20% or more over a prolonged time period.

During a bull market, investors around the world tend to buy more and also hold their investments longer – as they are not rattled by downturns in the market. You should still stick to your investment plan at this time and think long-term. This is the best way to take advantage of a bull market.

What is a bear market?

A bear market is like a gloomy period when prices are falling, similar to a bear settling down for a nap. 🐻📉

Economists define the bear market as a decline of 20% or more in one of the major stock market indices (S&P 500, or similar) over a prolonged time period.

On average, a bear market occurs every 3,5 years! Remember: the markets behave cyclically – so it will be very likely that you have to endure more than one bear market in your life as an investor.

Continuing to invest (especially if you have set up a monthly plan) is a smart way to lower your average purchase price of investments – as prices are cheaper during that time. By buying more for less money, you will increase the chances for bigger profits when markets turn around again.

What is the 4:1 ratio?

Bull markets tend to outlast bear markets by a factor of four. On average, bear markets have a relatively short duration of about 9,6 months, while bull markets stretch out over an average of 2,6 years.

This interesting tidbit highlights the long-lasting nature of bull markets.

As investors, we can take away that:

• the time to enjoy positive market trends and financial growth is longer on average
• bear markets (times when prices are down) are shorter than markets that allow us to grow our wealth
• patience & perseverance is everything when we find ourselves in the middle of a bear market