How to Pick Stocks in a Bear Market

When investing in the bear market you have to think long term, understand the type of strategy chosen, and select the right stock to buy. A bear market (the opposite of a bull market) is where the market is weak and the trader expects the price of stocks will drop. In other words, the trading volume is generally lower as prices fall during these weak market phases, however, it is still possible to make money in a bear market.

How to pick stocks in a bear market? Picking successful stocks that will perform over the long-term requires a rigorous research about that particular stock. A wise investor will always do a ratio analysis and evaluate the financial position and operating results for a prospective company. In most cases a single ratio does not generally provide sufficient information to judge the overall performance of the company. It should be compared with some sort of standards, for instance, comparing a firm's ratio to others in the same industry, or to the industry average.

Some of the most popular ratios used in the selection of stocks are earnings per share (EPS), and price/earnings (P/E) ratio. Many investors use the P/E ratio to determine whether a company share is fairly valued, under-valued or over-valued. During bear markets, the low PE stocks with high growth prospects are selected as the best investment option.

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