When you hear people talk about the stock market, they often throw out confusing terms and jarring jargon that almost sounds made up. To be fair, it sometimes is, and people just want to sound self-important. Yet every once in a while, they say a word worth learning.
The terms “bullish” and “bearish” might not mean anything to you other than “something to do with bulls or bears.” When discussing the stock market and how investors feel about a stock or the market as a whole, however, they’re super important.
In fact, knowing these terms could mean all the difference in picking the right stock…or making a bad investment.
On sites like StockTwits, you’ve probably seen the word “bullish” thrown around about various stocks and markets.
What does it all mean?
This user is “bullish” on GoPro ($GPRO) stock.
That means they think the stock is going to do well (hence the “Don’t sell! It’s on!” message).
Someone who is bullish (or a “bull”) on a certain stock is someone who believes the stock will continue to gain in value.
They might buy more, or hold on to the existing shares they have as it (hopefully) increases in worth.
Conversely, someone who is “bearish” or a “bear” believes that a stock isn’t going to do so well.
This bearish person, for instance, thinks that since over a million shares of Apple stock were sold in a single minute, this might be a good indicator that the stock won’t perform as well as people hope.
They might sell their shares of Apple before its share price decreases further, or bet against a stock with a short.
On a much broader scale, a bull market is when the economy is in a prosperous period of growth.
Things are good, share prices are going up, and hopefully stay that way for a while…but it can’t be like that forever.
That’s when the bull market turns into a bear market.
A bear market is when the stock market it is in a decline over a period of time, and can lead to an economic crisis.
Measuring bullish vs bearish sentiment for a stock is important.
If most people are “bullish” on a stock, then they believe it’s a sound investment.
If most investors are bearish on a stock, then it might be a good idea to monitor the stock.
Watch how the stock performs over time before you invest in it.
Seeing the sentiment between bulls and bears for a stock — or the market as a whole — is important when deciding what to invest in and when to invest. After all, if the overwhelming majority of investors think something will fail, you don’t really want to risk your luck against them. Then again, these predictions aren’t always correct, as no one knows for sure how something will perform in the future.
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