Bull & Bear Market
A bull market is a sustained period of rising prices; a bear market is a prolonged decline, usually 20% or more from recent highs.
Markets move in cycles, and these two terms describe the broad direction. A bull market reflects optimism and rising asset prices, often lasting years, while a bear market reflects pessimism and falling prices, typically defined as a drop of at least 20%. Trying to time the switch between them is notoriously difficult, even for professionals. For long-term investors, bear markets are when consistent investing through dollar-cost averaging buys assets cheaply. Staying invested through both phases historically beats jumping in and out.
Example
A portfolio that fell from $100,000 to $78,000 has entered a bear market (a 22% drop); when it climbs back and keeps rising, it is in a bull market again.
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Related terms
Volatility
The degree to which an asset's price fluctuates over time; higher volatility means larger, less predictable swings.
Diversification
The practice of spreading investments across different assets, sectors, and geographies to reduce the impact of any single investment's poor performance.
Dollar-Cost Averaging (DCA)
An investment strategy of regularly investing a fixed amount regardless of market price, reducing the impact of volatility over time.
Stock (Share)
A share of ownership in a company that entitles the holder to a portion of its profits and assets.
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ETF (Exchange-Traded Fund)
A fund that holds a basket of assets (stocks, bonds, or commodities) and trades on a stock exchange like an individual stock.
Compound Interest
Interest earned on both the initial principal and the accumulated interest from previous periods, creating exponential growth over time.
FIRE (Financial Independence, Retire Early)
A financial movement focused on aggressive saving and investing (often 50–70% of income) to achieve financial independence and the option to retire decades earlier than traditional retirement age.
Net Worth
The total value of all your assets (cash, investments, property) minus all liabilities (loans, mortgages, credit card debt).
Asset Allocation
The strategy of dividing investments among different asset classes — stocks, bonds, real estate, cash — to balance risk and return according to your goals and risk tolerance.
Dividend Yield
The annual dividend payment of a stock or fund expressed as a percentage of its current price.