What is Bull, Bear, Sideways and investment strategies

By Nipapun Poonsateansup, CFP ® Dependent Financial Planner

In general, the stock market is divided into 2 types: the market is upward. Or better known as the Bull Market and the down market or the bear market. In addition, there is another market, that not go up or go down that much and there is no clear adjustment direction. We will call it a Sideways Market.

The reason that the market called the bull and the bear is because of posture when they fight. Bull, when it's fighting, it will gore up. Like the stock price soaring. While the bear is fighting It will use the hand to paw down. Like the stock price that fell.

If the stock market is in a bullish state, all factors will look good, such as economic conditions and profitability of listed companies is growing Investors have confidence in investing and has a large volume of stock trading. On the other hand, if it is a bear condition, it will be the period when the "economic downturn" fundamentals and the period when investors start "not confident". The stock market is sensitive. Also, the government's policy regarding stock market stimulation may not be clear.

And how do we know that now is a bull market or a bear market

Stock market conditions will be a reflection of the goods market. If the market situation is good, will result in a thriving stock market, but in fact, the factors that indicate that the stock market is in a thriving phase are many.

  1. Good economy: the investment of the company and various businesses expands, the interest rate is at the level that good for investment, high exports, profitable business operators. The state has provided adequate facilities to entrepreneurs. Foreign investors invest a lot of money.

  2. Peaceful political situation both domestic politics and foreign politics

  3. Stock market forecasts are in a good way.

  4. Stock market conditions in foreign countries tend to be good. Which may be viewed from the Dow Jones (US) stock index, Nikkei stock index (Japan), Hang Seng stock index (Hong Kong), Dhanang shares, Straits Times (Singapore), which is a large stock market and reflect the global economy.

If the stock market has risen with the characteristics as mentioned above, should believe that the market is in an uptrend. Which is the right term for investment. However, investors still need to analyze various factors and always complete before investing.

On the other hand, the market condition is sluggish, also known as the bear market. Stock price index decreased or have a continuous downward trend which can be viewed from the following conditions

  1. The economic situation of the country is depressing. Business investment is minimal. Sluggish trade market conditions. The performances of various companies have reduced profits. Many industrial investment projects must postpone or abolish foreign investment.

  2. The stock market forecast is negative. Investors do not want to invest in shares. But investing money in safe assets or bank deposit. Causing trading conditions to decline.

  3. Stock markets in foreign countries tend to be lower as well. The investors can see from the index of important foreign stocks. Because the investment in foreign markets will affect the Thai stock market more or less.

By investing strategy, if it is a bull market, we can invest in high-risk assets. However, investors must be careful about price chasing. Making it possible to buy stocks that are more expensive than the reality. Therefore, analyzing the fundamentals of stocks. It is also something that investors need to focus on.

If it is a bear market, it means that investors should hold more cash than risky assets.
Wait and see the situation until the market is recovering. Which is a strategy that focuses on preventing loss. However, there is one interesting strategy for looking at stocks during the bear market, ie, investing in Value Stock. Which is an investment approach that focuses on investing in businesses that investors believe that the stock price is lower than the underlying value. By analyzing various accounting values ​​or financial ratios, such as book value, share price, profit per share, Price-to-Earnings Ratios, the proportion of share, Price-to-Book Ratios, or Dividend Yields. If the investor has regularly analyzed the investment stocks in a sluggish market condition, may be an opportunity for you to buy good quality stocks at a reasonable price.

For the investment strategy in the Sideways market, investors should choose to invest in businesses that grow even when the economic conditions are not favorable. For example, the company is in an industry that is still growing in the future. The company's performance is stable, not volatile, even though the economic conditions are "bad" or can call it a "defensive" stock. Which is why we must choose high-quality stocks. Because the quality will guarantee that the company will be able to overcome obstacles. And when the obstacles passed It will quickly grow again. In addition, we should choose stocks that have good returns in the form of dividends. Because this dividend will reduce the risk that we can have been less damaged in the time that the stock market is going down. The return on dividends is extremely important in investment. Because during the period when the market is not good or there is no trend Dividends may be considered more than 90% of all returns. And no matter what the market is valuation for individual stock selection Is something that will give investors a better return than the market.