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Stay even -- Hard to accomplish!

Posted by Ward on August 31, 2004

In Reply to: Stay even posted by Lotg (OZ) on August 31, 2004

: : : :
: : : : If this bear market is to last for another decade,
: : : : it will be very difficult to stay even.

: : : : What does "stay even" mean here?

: : : As I understand it (and I'm no financial whizz, so guys, eg. Ward, perhaps you can help me here), a Bear Market is a falling market. This statement suggests to me that the speaker is saying if the market continues to fall it will be impossible to maintain the financial status quo and not to lose. Although it sounds like an odd statement to me, because I would think if the market falls, losing would be unavoidable, unless the writer has managed to invest in stocks that don't fall while the others do. And unless the writer is suggesting that even if they have invested in stocks that aren't falling, eventually in a Bear Market, their stocks too will eventually succumb.

: : : But I have absolutely no knowledge of the stock market, so did I get even close to the mark and I need help guys!!!!!!!!!!

: : Yes, you did stumble into an answer. But (as PeeWee Herman says, everybody has a big But) why rush and gush when you have "absolutely no knowledge" and ask for help with your guess? Why not wait and let people who do have a clue answer the question?

: Cos I knew I wasn't too far from the facts and I don't take myself too seriously. Trust me Voice of Restraint - you could learn a valuable lesson here too. Taking yourself so seriously can be very risky, because it's unlikely anyone else will take you as seriously. Furthermore, if you hadn't spent so MUCH time taking yourself so seriously you might have realised that in doing what I did, I was also asking for information and thus also willing to learn. Another lesson that might be of some use to you in the future.

In a bear market, the general market is losing value (declining) so that an investment made of a basket of the stocks in the overall market index would be declining by more than 20% (definition of a 'bear' market condition). So your average investor would be losing value under these circumstances. There are other investors who, perhaps, choose more defensive stocks, and will have a better result. The real beneficiary of a bear market is the 'short seller' --who anticipates the decline and sells stocks that he/she borrows for that purpose, and then buys the same amount of the stock later to cover the short sale---but buys it at a lower price. The price difference between the two transactions is the profit a short seller makes from a falling market.
In investing --- staying even is probably the hardest thing to do unless you are in very conservative investments like long term bonds. And even then, the market value goes up and down as interest rates change. So the norm is to go up or down --- and not to stay even.