If you turn on any financial analysis channel or pick up an investors’ journal, expect to be confronted by all kinds of jargon and terminology analysts throw around with abandon. While understanding some of the concepts many investors take for granted can be tricky for a novice investor -- good luck finding a succinct explanation of credit-rate swaps -- some investor lingo is so common you’ll wonder why they even use jargon. The phrase “bullish stocks” is certainly one of the easiest investment principals to understand.
Although nobody’s really sure where the investor slang originated, a bullish stock is one with consistently rising prices over the long term. It’s not quite as simple as straight-line growth, however: A bullish stock’s value may rise and fall periodically, but every time its value peaks, it’s at a higher point than the previous peak. This is also known as “ascending tops,” although that phraseology isn’t nearly as flashy, so you probably won’t hear many on-air analysts use it. Because of their continued growth, bullish stocks are good investments.
Just like a single stock’s growth can be bullish, the market can be described as bullish as well. Typically, investors reference an index, such as the Dow Jones or NASDAQ, and examine its peaks as a measure of the entire market’s health or performance. Bull markets display price graphs with ascending tops and are associated with periods of economic growth. Bull markets don’t necessarily equate to bullish stocks across the board, and individual firms’ stocks may underperform the market, just as some stocks are bullish when the market isn’t.
Bear Stocks and Markets
Most concepts have their opposite, and bullish stocks are no different. If a stock or the market’s peaks come at increasingly lower prices, it’s technically known as descending tops, but most lingo-happy investors call it a bear market. Because stock values decline in bear markets, they’re associated with contractions in the market, such as corrections following a bubble or poor economic conditions. You can still pick a bullish stock in a bear market if you do the research, but they’re much fewer and far between in this economic environment.
Tips for Investing in Bull Markets
Although investing in a bull market is usually more forgiving to novice investors, it doesn’t give you the green light to put your life savings into “sure thing” investments because of it. Don’t invest in companies you don’t understand -- it’s better to underperform in a bullish market than risk everything on a bogus tip you can’t analyze properly. Don’t confuse a stock’s prior performance as an indicator of its future performance, as a bullish stock can stop growing at any moment. Lastly, don’t chase the market. Investors who do best in bull markets get in early when there are plenty of growth opportunities.
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