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Financial Term of the week- Bear Market

A bear market is one when the financial market witnesses a continuous drop in the prices of the securities. It is commonly used in reference to stocks but can be applicable to any form of security like bonds or even real estate. Bear markets can be spread over several years also and are not short-term lulls in the market.

Knowing more about Bear Markets

When the market is bearish, the investor sentiment is negative, and the companies are not in an expansion or growth phase. Not that there are no gains seen in a bear market; there are, but the gains are not sustained. Bear markets can be cyclical or long-term; while the former may last a few weeks/months, the latter can last for many years. They may be a common sight during a recession or economic downturns, owing to multiple reasons. The supply of stocks is seen to be higher than the demand for them. One can observe scepticism, fear, and at times, a certain rush to protect the investments from losses. Investors also become relatively more averse to risk-taking.

Bear Market - Nippon India Mutual Fund

However, the bear market and market correction are two different market phases and must not be confused. Market correction may last for a lesser period as compared to a bear market. Investors may find it extremely difficult to find the lowest phase of a bear market, which may offer a suitable point to invest further. However, in a market correction scenario, investors may be able to find suitable points of entry for investments.

The opposite of the bear market is a bull market when the stock prices are increasing, and the country’s economy is witnessing an overall growth. -.

What does it mean for a mutual fund investor?

Since the equity mutual funds are dependent on the stock market, the bear phase affects mutual funds. When the stock prices go down, the Net Asset Value (NAV), which is the per-unit cost of the mutual fund scheme, also goes down; and vice versa.

Often, it is seen that investors tend to panic when the value of their investments goes down, turning towards redeeming. There are two sides to this. Firstly, no phase in the financial market is permanent. If you are experiencing a bear phase today, past history proves that this shall pass and be replaced by a bull phase. It is just difficult to predict when this happens. Secondly, when you redeem in a bear phase, often you will book a loss because the stocks your mutual fund scheme may have invested in, may have declined considerably in value. It is advisable to stay invested if your investment goals are in line with the fund’s investment objectives. In fact, in times like this, some experts might suggest investing more money in the market. This is because you’d be buying the same units at a NAV much lower than the average NAV. Also, discontinuing or pausing your SIPs (Systematic Investment Plans) may not be a good idea because this is the time when you can buy more units.


Disclaimer:
Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
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While utmost care has been taken in translating the article into respective regional language(s), in case of any confusion or difference of opinion, article available in English language should be deemed as final. The article provided herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional advice for the readers. The document has been prepared on the basis of publicly available data/ information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this article.
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