Concept of Bull Market

Bull market meaning: A bull market is a prolonged rise in price; it can be for months or years. Stocks, commodities, currencies, real estate, etc., can also experience bull markets. If there is a 20% price increase after two 20% plunges. A bull market is a phase when most of the market index rises at least 20% or more. Many investors and traders actively trade and invest to achieve better stock targets in the bull run during the bull market. The bull market reflects the good condition of the GDP and the growth of a nation. Because of this, an inverter gets more confident to invest their money in the stock market. A bull market motivates people to invest and make more money in the higher end of the stocks.

Characteristics of a Bull Market

You must have understood briefly what is bull market mean in brief. Now, let’s discuss its characteristics. A bull market comprises several things. 

• First, if there is a strong economy, there will be a bull market. Often, a bull market goes well with Gross Domestic Product (GDP) growth, where companies will gain significant profits. 
• Second, when there is a rise in investor confidence, it will indicate a bull market. As a result, you can see strong demand for stocks overall, while the market tone becomes very positive. 
• Third, companies enjoy higher equity valuations; also, there will be good quality Initial Public Offerings (IPOs).

How Does a Bull Market Compare to a Bear Market

A bull market is different from a bear market. Both “bear” and “bull” terms mean two animals; here they are, opponents attacking each other in the market. A bull takes its horns upward, while a bear takes its paws downward. Likewise, a bull market will occur when there is an uptrend, while a bear market will happen when there is a downtrend. 

There is a frequent chance that bull and bear markets happen simultaneously, where there will be four phases: Expansion, Peak, Contraction, and Trough. It is like a prominent economic expansion indicator. The value of stocks depends upon public sentiment regarding future economic conditions. Therefore, there is a chance of a frequent rise in the market before broader economic measures like Gross Domestic Product (GDP) growth. Therefore, you need to handle both markets patiently and plan your investment accordingly. If you overview each market, you can find a perfect opportunity to invest irrespective of the bull or bear market.

How to Invest in a Bull Market?

Here are the following significant factors to consider to effectively invest in a bullish market. 

The Quality Portfolio is a Must

When the bull market begins, there will be a lot of good and bad companies rallying with the market visible to you. After maturing the bull market, there will be more selectiveness to reward only a few companies with higher valuations. Going for quality gradually comes under the basic rules. When the market is rising, move progressively to safety.  

Work on Financial Plan

Work on your financial plan and execute it accordingly. Include how much you should allocate to Equities, Debt, Gold, and Liquid assets. It will help you bring back your allocation for profits when it loses track. It means you reach higher valuations and get liquidity when there are cheaper options.  

Churn Your Profits

It is good to churn and book profits consistently based on a long-term approach while there is a bullish trajectory. Along with gaining regularly, there is also an opportunity of re-entering the same stock at higher. 

A Phased Approach is Good

It is good to opt for the good old SIP approach in a bullish market. Another good approach is buying in lump-sum and then keeping it till eternity. However, it may happen like investing in lump-sum without having surety about entering the market at the right time. Therefore, looking for a phased approach is better than waiting for longer or investing in an unsuitable stock. 

A Phased Approach for Selling

There should be a phased approach for selling stock as you have a phased approach for investing. After exiting a stock, you will get a higher price in a bull market. So even though you will not be at the top, you will be excited at a better price. There is no need to worry about timing your exits. 

Avoid Waiting on Your Losses for Longer

There will be a surprise on the upside as well as the downside. Like you bought a realty stock when it was at a 2007 bull market peak and continued to sit on huge losses. So you should prepare yourself mentally when you want to exit a particular price. But, first, you must decide how much you are willing to lose in advance. However, there is an importance for a loss booking discipline in a bull market. 

Get on the Market Momentum Side

If you are a small investor, you must follow a bull market. But, of course, a bull market is non- unidirectional. So, there will be an up in momentum until there is an entire bull market. Therefore, it is better to keep yourself on the same momentum side. So, you can follow the strategy of buying high and waiting for the stock to rise. Otherwise, you can also switch to using dips for a buy. Of course, if you are trying to make a sell-by going against momentum, there will be a possibility of losing essentially. But, it is the best way to learn and understand what is there or not in the market. 

Market timing is tough to handle, and you never know when the prices will change their direction. For example, suppose you move your fund in securities just for a month; then, there are chances that you don’t get the right idea about the market condition. Therefore, the recovery of stock price and stock price rise is possible only when you plan your investment correctly. 

The market can give you various opportunities; whether a bull or bear, you need to revisit your portfolio and make proper return plans. Also, make sure to measure the risk that you can afford properly. As a trader or investor, the risks are not always the same. There are chances of heavy loss and enormous profits in the stock market.

Options are Helpful for Hedging

Trading in futures and options (F&Os) is a helpful hedge against risk in a bull market. However, it is unpredictable when there will be correct sharpness in the markets. Therefore, you must buy put options to hedge against your downside risk. It may be daunting to invest in options initially. So, you must understand these assets better before you invest. You will get a low-cost hedge against risk in options. 

Bull Market Examples

Here are the following examples of the Bull market. 

• One of the most prolific bull markets began at the stagflation era’s end in 1982 and ended during the 2000 dot-com bust. It is a secular bull market and comes under America’s modern history. This bull market continued for many years; the Dow Jones Industrial Average (DJIA) averaged 15% returns every year. NASDAQ is an American tech-heavy exchange whose value increased from 1,000 to over 5,000 from 1995 through 2000.
• In 2009, the market experienced a ten-year bull market run.
• According to some analysts, the last bull market took place on March 9, 2009. It is a result of an upswing in technology stocks.

Conclusion

A bull market refers to a broad or single market where prices continuously rise. As a result, investors and traders can find opportunities to put money in good financial assets to profit significantly. A bull market is the most desired condition for many investors, and there can be several bull markets once a year depending upon several crucial factors worldwide.