What to do in a Bull Market?
Based on analysis, a bull market is when the financial market is up 20% or more. As of June 2023, the S&P500 is up 20% from its low in October, and many are starting to rally behind it.
However, many investors wonder whether this is a great time to buy, sell or hold.
First, we need to ascertain what kind of investor we are.
I am a long-term investor. This means I buy a company’s stock with sound business practices and dollar-cost average over the years. I invest in the company because I believe it will do great in the long run.
However, some investors are in it for the short term. These people are traders, and they buy and sell stocks based on technical analysis to make a profit.
So once you have found out what kind of investor you are, let's see what we can do in this bull market:
Increasing buy and hold
This might make sense, as buying a share of the stock early in the bull market may see an increase in price over time. The optimism of the bull market will fuel this rise, and as an investor, you hope to sell it for more later.
The cons of this is that you might not know how long a bull market last. Analysts have shown that an average bull market lasts 2.7 years, whereas the average bear market lasts ten months. Do what you want with that information.
Dollar-Cost Averaging (DCA)
If you are far away from your goal or you are investing for your retirement, you can do DCA. DCA is the strategy of buying and holding regardless of market sentiment.
This means that you invest in a diversified portfolio, or if you what to keep your headache to a minimum, you can invest in a mutual fund or a diversified ETF.
This removes any attempt at timing the market, which is a very difficult thing to do.
This strategy is for the long-term holders that are willing to buy into the stock regardless of what market they are in.
Enter Riskier Stocks
Riskier stocks do not mean buying any stocks. Instead, enter stocks that have sound business practices but may not have a long history, like Coca-cola. These companies are risky because of their sector, or they may be in new businesses.
Companies like Tesla, Palantir, Nvidia, and even Shopify. These companies are generally from the technology sector.
The most recent hype involves artificial intelligence (AI). Companies dealing with AI are getting a boost in this bull market. One example includes Palantir, which has risen more than 150% YTD.
However, note that risky stocks might make the downfall even more painful. Based on social sentiment and investors’ confidence in the sector, these companies can go either way quickly.
Conclusion
These tips should not be taken as financial advice. Whichever strategy you adopt, it is best to look back at your portfolio and what kind of investor you are. There is no one size fits all strategy.
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