It seems that one of the favorite questions Muslims like to ask about anything seems to be “Is it Halal?” When investing, there are two types of animals that you need to be aware of. Not to eat, but to understand what these two animals represent. Inevitably we expect a comment below asking if they are permissible to eat, but that’s for another site.

Bull Markets

Yearly in Pamplona, Spain there is a festival in which bulls are released into the streets to transport them from the off-site corrals where they are kept. The bulls used in this festival are also those that are used later in the day in the afternoon bullfight. While in the streets, young men jump in front of the bulls to prove their bravado. The Bulls lunge at the participants, thrusting its horns upward trying to toss the target into the air. A “Bull Market” is one that spikes upward, the bull being a metaphor for where the market is headed. So when the market trends upward, it’s a Bull Market.

Bull markets can be very profitable, with more investors entering the market to trade because of the upward trend. This has a broader effect on spending, because since 401ks, IRA, and other investment funds are gaining people feel wealthier and so they spend more freely. So spending breeds optimism, and optimism more investment, and market indices continue to rise.

Bear Markets

This does not continue forever, because the Bull market is the Ying to the Bear Market’s yang. Markets are cyclical, and so when optimism staves off and confidence is down, spending and investing follow. People tend to sell or save, and that’s when you get a Bear Market. Bear Markets are so named because of the way a bear swipes their paws downward. They are marked by general decline, unemployment, and a rise in inflation. Because people are losing confidence in markets, they are no longer purchasing stocks. They put their money in cash, gold, and bonds.

Sideways Markets

A market that is almost impossible to make money in, a sideways market goes nowhere. While stocks may go up and down, they generally stay where they are. Investors sit out the market, most of their holdings in cash. The safety of sitting out also means the certainty of no earnings.

Bottom line:

Warren Buffet is quoted as having said, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.” There are strategies you can use for investing during each of these markets. Before investing in anything, be prepared for any of these three markets and the conditions that accompany them. Understanding types of markets and market conditions allows you to develop the psychology necessary for profiting in any market.