Ways to make money in bear market

Highlights

• A bear market is one when prices of stocks go down. The market becomes hyper pessimistic, and it gets difficult to predict when share prices will go up again.
• Most people see bearish markets in a negative light; however, there are ways in which one can make money even during a bearish pull.
• Investing in high discounted stocks of generally high yielding companies is a good option during a bearish pull.

Sinusoidal trends are a share market reality and market cycles are extremely dynamic. Thus, every wise investor needs to be apprised and ready for market changes. Almost everybody likes a bull market, but if you want to stay in the game during the bullish period, quitting in the bearish time frame may not be the best investment choice. And, what’s investing life without some change and risk?

Share markets go from bullish to bearish phases depending upon several factors that affect the prices of securities and stocks. So, first, let’s understand the two sides.

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Bullish and bearish sentiments

How can you make money in a bear market?

A bullish market is when the prices of stocks rise- the stock market booms, companies and their stakeholders make optimum profits. This is when people sell off their investments to make maximum returns.

Thus, all the short term and long-term investors await the bullish period to realise the return on their investments. However, when there is a bullish sentiment, there is deemed to be a bearish spell looming. So, what happens during a bear pull? - A bear market is such when the prices of stocks go down. The market becomes hyper pessimistic, and it gets difficult to predict when will the prices go up again.

The recent market downfall was experienced in several countries right after the Russian invasion. So, when the prices of each stock go down, the expectation for return on investments also goes down. Thus, people often make bad decisions in such scenarios by selling off their stocks in fear of losses and losing more money.

Most people see bearish markets in a negative light; however, there are ways how one can make money even during a bearish pull. Let’s have a look.

How to make money in a bear market?

Choose which stocks to buy: The most critical decision in a bearish pull is choosing which stocks to buy. For instance, big companies, which are generally high yielding, sell their stocks at high discount rates to generate more money during a falling market. Thus, investing in such stocks may be a good choice for investors.

Prioritise dividends: Even if the final prices of stocks are going down, the company is still earning profit and subsequently offering dividends. Investors should therefore buy stocks of such companies to receive dividend income even in times of a bearish pull.

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Critically analyse timelines: The most crucial aspect in a bear market is to investigate when the right time is to buy stocks. There are two mistakes people make here- they either purchase new storks too early, so if the prices of the stocks keep falling, they incur losses. Secondly, at times, people wait too long to buy, and if the prices start rising, the opportunity to make maximum profits is gone.

Don’t panic: Lastly, if you are a long-term investor, you shouldn’t worry about bear market losses. The only thing to ponder upon is whether the stocks you have in your portfolio are good in the long term. Because good stocks generally come out well from the bear market.

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A bearish market is a market reality and escaping its effects is impossible. Thus, all investors should be ready to bear the pull of the bearish time zone in the market. Besides, making money is quite possible during a bearish pull. However, people need to be cautious, smart, critical, and patient while investing in the market during the bearish pull.