My strategy in a bull market centers around actively preparing for the next bear market, as I believe this is the ideal time to build resilience against future economic downturns. While many investors focus on maximizing gains in a bull market, I take a different approach: I prioritize caution and take steps to strengthen my portfolio’s defenses, believing that such preparation is best done when optimism is high and prices are elevated.

1. Risk Management and Capital Preservation: In a bull market, many assets become overvalued, and investor sentiment can lead to a sense of complacency. Rather than joining the rush for high returns, I focus on risk management and capital preservation. My goal is to avoid becoming overexposed to high-risk assets that are likely to suffer in a market downturn. By preparing for a bear market now, I’m working to safeguard my portfolio against significant losses, which can be more damaging and harder to recover from than temporarily missing out on the top gains of a bull run.

2. Increasing Bond Exposure as a Defensive Hedge: A key component of my strategy is to allocate more to Treasury bond ETFs, particularly TLT (iShares 20+ Year Treasury Bond ETF) and TLH (iShares 10-20 Year Treasury Bond ETF). Treasury bonds are among the safest assets available. By investing in longer-duration Treasury ETFs like TLT and TLH, I’m positioning myself to benefit from their inverse relationship with interest rates: when economic conditions decline, interest rates often fall, which can increase the value of these bonds. This helps to offset losses in equities and serves as a buffer during downturns.

3. Taking Advantage of Current Low Prices: At this point in the market cycle, the prices of long-duration Treasury bonds are relatively low due to higher interest rates. This makes it a favorable time to accumulate these assets, as lower prices increase their potential upside if rates decrease in the future. Buying in at these levels enables me to build a defensive position at a discount, setting up the potential for gains or stability when economic conditions eventually change.

4. Building Portfolio Resilience and Diversification: While I’m not abandoning equities altogether, I recognize the importance of balance. By incorporating assets that typically perform well under different economic conditions, I am diversifying my portfolio to better weather market volatility. This diversified approach is designed to maintain growth opportunities in bull markets while retaining resilience in bear markets, allowing my portfolio to be more adaptable and less reactive to short-term economic changes.

5. Psychological Preparation and Reduced Market Dependence: Preparing for a bear market also provides a psychological advantage. Knowing that I’ve built in protective measures reduces the pressure to react emotionally to market volatility. This steadier mindset helps me remain focused on my long-term goals rather than getting caught up in day-to-day market fluctuations. I’m not overly reliant on continuous market gains, so I can avoid risky, high-leverage strategies that others might adopt during bull markets.

6. Embracing a Long-Term Perspective: My emphasis on bonds and hedging strategies is a reflection of my commitment to a long-term perspective. Rather than chasing short-term gains, I aim to build sustainable wealth that can withstand multiple market cycles. By accumulating safe assets and reinforcing my portfolio’s foundation, I’m positioning myself to endure downturns and emerge well-prepared for future opportunities when prices become more attractive in a bear market.

7. Readying for Opportunities in a Bear Market: Another benefit of my defensive approach is that it frees up capital and prepares me to take advantage of opportunities that arise in a bear market. When stock prices fall significantly, having a cash buffer from safer investments like TLT and TLH can enable me to buy high-quality assets at a discount. Rather than scrambling to sell overvalued assets in a down market, I’ll be ready to strategically enter positions in undervalued companies with high growth potential.

In summary, my approach to a bull market is grounded in caution, long-term planning, and an understanding of market cycles. By increasing my exposure to Treasury bond ETFs like TLT and TLH, I’m building a hedge against potential economic downturns and setting up my portfolio to remain stable through both growth and decline. This balanced strategy is about building enduring wealth and staying prepared, regardless of where the market goes next.