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Understanding “The Market”
In March 2020, the economy took a sudden change. After years of growth in stock prices and significant optimism in the market, everything plummeted.
If you pulled up any news channel during this time, you likely saw countless newscasters describe the fall of the stock market and decline of stock prices.
The economic situation that occurred in reaction to the world-wide virus pandemic is termed a “bear market”, and if you have any desire to invest one day, it is important to understand what this term means, and know what it means for your money!
The Bear vs The Bull
Along with periods called “corrections” that we will describe later, there are essentially two main turns in the economy that everyone should be aware of.
The Bear Market is a time when market prices take a 20% decline over a period of time.
This downfall can be caused by a handful of events. But such a decline encourages stockholders to sell, or else they could lose out on millions of dollars of their net worth.
Unfortunately, the combination of people pulling out of the stock market along with the economic downturn can result in an economic recession or a severe depression such as what occured in the late 1920’s.
A bear market can wipe away earnings from a bull market, potentially causing large financial losses.
Due to the unknown of when the stock market will quit decreasing, it is difficult to know when to invest money at the low prices.
The Bull Market is a time when market prices increase by greater than 20% over a period of time.
Bear markets lead into bull markets as stock prices cease to decline. People begin to invest cash into the stock market and the economy begins to roll into a bull market.
The bull market is an opposite type of market trajectory, when stock prices increase. These markets are popular to invest in as there is positivity within the market and people are buying with the advantage of low stock prices and the prospect of growth!
Understanding the Market “Correction”
A correction in the market is easy to understand, if you grasped the concept of the bear and the bull markets!
A correction involves an increase of 10% in the stock market – not enough to be considered a bull market but enough to drive optimism and confidence.
Unlike during the uncertainty of a bear market, a correction offers a safer entry-point for investors to step back into the stock market.
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Bull Market decline in stock market prices
What To Do During A Bear Market
The most important action to take with your money during an economic downturn is simple: DO NOTHING.
Think of it this way: What have you been told to react if you encounter a bear in real life?
Move slowly, no eye contact, and remain calm, right?
When you encounter a bear market, it is important to react the same way! Don’t keep your eyes on your investments and don’t run away by selling out quick.
Reason is, there is ALWAYS a bull market that follows a bear market! It’s scary at first, but once you slowly walk away, you’re safe. You know that everything will be fine until the bear is completely gone.
The markets are cyclical. Meaning, they always go up and go down! Every year there are downturns and upslides of stock prices. Some last days while others last months.
Investing During A Bear Market
If you are on your financial journey, it is never too late to start learning about the stock market!
There is no better time to learn about the stock market than now!
Instead of looking for advice of when to invest during a bear market, it is critical to start learning about the foundational ups and downs of the stock market with either a trusted investing book for beginners or an app created for the new investor in mind!
If you plan on investing in a 401k, mutual funds, ETFs, a RothIRA, or simply stocks, it is never smart to throw money into something you don’t understand!
Below are 3 free (or super cheap) apps to begin practicing with the stock market – built for beginners!
1. Robinhood
Robinhood has been around for awhile now and has grown to be a leader in micro-investing, and investing for millennials.
It is a perfect place to start for it is easy to use, beginner friendly, and FREE. What’s not to love?
PRO: Free stock, ability to learn and watch the stock market without any investment
Get your free stock here!
2. Acorns
My second favorite app is Acorns, which makes the “saving and investing” process 10x simpler than any other way out there.
It’s a revolutionary way to save money up, without even thinking about it.
PRO: Free $10, extremely easy way to save money and learn to invest for beginners
Get your free $10 here!
3. Stash
One of the most revolutionary apps out there is Stash, and it’s quickly proving itself to be a top contender for investing apps!
Unlike the other two apps, Stash gives the option to invest in not only stocks but also ETFs and bonds. It’s an innovative option with the opportunity to invest in fractional shares, making the process much easier for beginners!
PRO: Free $5 to invest, streamlined app that allows you to invest in very small amounts
Get your FREE $5 here!
Summary
A bear market is an uncertain time, but it is encouraging to remember that the market always returns.
Spend some time with your new apps and examine how your free stocks had increased over the past few years. Don’t focus on the drop of the market during a bear market – instead, focus on the growth that will come soon!
What is your favorite platform to invest with? Let us know your thoughts in the comments below!