Welcome the Bear Markets!

Although we are seeing a furious rally last in the past 4 months, are we already in the bull market or is it just a bear market rally?

If you said “I do not know”, welcome.

This is a good thing. Smart and Legendary investors understand this. Ordinary investors don’t.

If you haven’t spent much time buying stocks getting excited about a bear market doesn’t just sound counter-intuitive, it sounds nuts. After all, how can you feel appreciative watching the value of your life-savings grind lower? Life was so much fun when you were buying at 19000 and the index went to 22000 was it not?

However, if you are an investor, think a few months ahead. Or even years ahead. The kind of returns that you can get after a 30% fall in the market is phenomenal.

Every stock investor knows that you’re supposed to buy low and sell high. Bull markets give you a chance to sell high. Bear markets give you a chance to buy low. So if you are 22 years of age and are planning to buy stocks for the next 45 years, you need more bear markets than bull markets. At least till you are INVESTING you want a bear market, and when you are selling you want a bull market.

If you want to prosper during the next bull market – the one that will propel the averages to new highs in the years ahead – MAYBE now is your chance to pick up some bargains. When the Sensex goes up, please realize it could be just index manipulation. Just buying a lot of Reliance and Infosys takes the index higher. CHECK YOUR PORTFOLIO, and see if those shares have gone up.

Unfortunately, too many investors are lulled into complacency during bull markets and scared out of their wits in bear markets. So they do just the opposite, buying high and selling low. In fact a friend calls it a family hobby – buying high and selling low!

Read Dr. Jeremy Siegel, author of “Stocks for the Long Run, Read John Templeton, ….see how Warren Buffet and Peter Lynch have celebrated bear markets.

Remember 30% falls can be followed by 30% gains! However it can fall for some more time before it rises.
Take any rolling 7-year period over the last 30 years, and stocks have outperformed bonds.
Take any 10-year rolling period and shares have given a positive return even adjusted for inflation.
Bear in mind, no one when can tell you when the next bull market will begin, how long it will last, or how high the market will ultimately go.

At Berkshire Hathaway’s annual meeting in May, Warren Buffett said “I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month.” Why? He knows he owns great businesses. He would like to own them even cheaper.

During bull markets you hear “buy, they do not make stocks anymore” and in bear markets they tell you “sell, or at some time there will be no buyers”. Both are wrong. Completely wrong. Markets go up and go down. Do an SIP. That makes sense. Do it now. It makes more sense.

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  1. I read in one of the websites , can’t remember which one was it…, buy shares when they are beginning to rise and sell they begin to dip instead of just depending on buy low and sell high. Is this a valid advise and if yes, how effective?

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