Some of that worry is certainly justifiable given the recent increases in volatility over the last few years. Truth be told, both bull and bear markets are completely dissimilar animals and behave quite differently. While investors shouldn't completely change their long-term plans at the drop of a hat, making simple adjustments to a portfolio can help cushion losses or exaggerate gains.

Even the smallest retail investor can benefit from making some tweaks to his or her portfolio allocations, depending on the market, and see results. History has shown that the stock market and the economy move in cycles that repeat over and over; therefore, understanding the different stages of the economy can help guide your investment decisions.

Market conditions come in two flavors: Each comes with their own set of nuances. Bull markets are generally defined as periods when investors are showing immense confidence. Indicators of this confidence include rising stock prices and surges upward in major market indices like the venerable Dow Jones Industrial Average NYSE: Conversely, safe-haven assets, like gold and bonds, will fall by the wayside in the face of a bull market.

Additionally, the volume of shares traded is higher, and even the number of companies looking to tap the equities market via IPOs increases. Other economic factors such as consumer confidence , natural resource demand and better jobs data all play into this confidence.

Market trend - Wikipedia

On the flipside, bear markets are simply the opposite of a bull: Stock prices drift sideways or fall, indices fall and trading volumes are stagnant. At the same time, brokerage cash and bond balances generally are higher, headlines in your local newspaper's business section turn pessimistic, and all in all, investors feel less confident about the near future.

Given that a bear market is all about a lack of confidence in the economy, investors should turn toward safe havens during this period. That could mean adjusting the percentage of bonds you hold upward. Essentially, a bond is a fancy IOU that companies and governments issue to fund their day-to-day operations or to finance specific projects. Bonds are less likely to lose money than stocks are and can reduce your portfolio's losses during stock market declines.

Secondly, bonds pay interest regularly, so they can help generate a steady, predictable stream of income from your savings in bad times. Adding a fund like Vanguard Total Bond Market ETF NYSE: TLT , which both bet on high quality bonds, can be used to quickly gain access to the asset class. See The Advantages of Bonds. At the same time, focusing on blue chip stocks could prove fruitful in bear markets. Blue chips are better equipped to handle any possible downturns in the market and their bulk offers advantages in a slowing and uncertain economy.

These advantages include their larger dividends, ability to acquire floundering smaller competitors and lower volatility. The Guggenheim Russell Top 50 Mega Cap NYSE: XLG is a prime play on larger firms. Finally, there are some alternatives investors can bet on to tackle the bear. Shorting stocks through an inverse ETF or adding bear market mutual funds could provide short-term relief from dwindling stock prices.

VXX could make sense. Given all the euphoria that surrounds a bull, investors should feel confident to take on more risk. That means loading up on stocks with dodgier profiles. These sectors tend to do exceptionally well during bull markets; overweighting them through various sector ETFs is a good idea.

Then there are emerging markets to consider. As such, funds like the iShares MSCI Emerging Markets Index NYSE: EEM tend to surge when the bull is running.

Finally, even in fixed income there are bull market plays. High-yield or junk bonds ' return profiles have more in common with stocks than traditional bonds. At the same time, high-yielding real estate investment trusts REITs or pipeline master limited partnerships MLPs offer a chance to participate in rising stock prices as well as collect big dividend checks. A fund like the SPDR Dow Jones REIT NYSE: RWR is perfect bull market fodder.

While investors shouldn't feel compelled to change their portfolios radically in reaction to the market's daily moves, small adjustments in the face of a bull or bear market could be a prudent move. Adjustments to how the market perceives risk could save investors from catastrophic losses or help create exaggerated gains.

Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund. Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin?

This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. How To Adjust Your Portfolio In A Bear Or Bull Market By Aaron Levitt Share. Volatility Reigns Supreme History has shown that the stock market and the economy move in cycles that repeat over and over; therefore, understanding the different stages of the economy can help guide your investment decisions.

Adjusting for a Bear Given that a bear market is all about a lack of confidence in the economy, investors should turn toward safe havens during this period.

Banking Profits In Bull And Bear Markets

Let the Bull Run Given all the euphoria that surrounds a bull, investors should feel confident to take on more risk. The Bottom Line While investors shouldn't feel compelled to change their portfolios radically in reaction to the market's daily moves, small adjustments in the face of a bull or bear market could be a prudent move.

Discover why it's important to know the characteristics of the two types of market conditions. Looking back at the history of bull markets can give some context on where we currently stand. Bull and bear markets shouldn't really matter to long-term investors.

There are many ways to profit in both bear and bull markets. The key to success is using the tools for each market to their full advantage. Find out why no bull market lasts forever, and why investors should shift their assets away from growth and toward dividends when stocks slow down.

How to trade in a bear market - MarketWatch

Learn about the state of U. Bull and Bear Markets are a reality that every investor must be prepared for. Here are a few tips. Being able to accurately spot the beginning of a bull market can be one of the most lucrative skills around. The terms bull and bear are used to describe general actions and attitudes, or sentiment, either of an individual bear and Read about the types of securities, such as stocks or ETFs, that tend to post the largest gains when the economy is enjoying A bull market is represented by a rising price trend, and a bear market is indicated by a falling price trend.

Take a deeper look at the relationship between the bond market and equities, and see what might happen to bonds during the Learn about a number of various technical indicators traders and analysts use to define and confirm the existence of a bull No thanks, I prefer not making money.

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