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What Is The Bull Market? How To Invest In Bull Market? What Are The Don’ts That You Must Follow?

Investing in the stock markets is a continuous process. While investing in the stock market, you should be looking at growing capital from the up-trending market, hedging your portfolio against losses and utilizing the periods of volatility in the markets to your benefit. Opportunities for growth are there in both bull and bear markets. Both the market cycles are fraught with risks as well. However, making decisions under risk and uncertainty is the essence of equity investing. Decision making requires discipline, consistency and focus. An investor with these qualities will utilize the opportunities that the bull market presents and prosper.

What is a bull market?

A bull market is characterized by a rise in prices over a while. Generally associated with an increase in equity prices, a bull run can extend to other investments such as realty.

Also Read: Avoid These Eight Common Mistakes In Bull Markets

How to invest in bull markets:

how to invest in a bull market

Bull markets provide ample opportunity for wealth creation. It is the ideal time to take advantage of rising prices by buying stocks earlier and selling them at higher rates. Losses in a bull run are minor, and the investor has a greater probability of earning returns. Some of the ways to profit in a bull market are as follows:

1. Evaluate personal goals 

Assessing your own goals is the first move to making informed decisions. A personal evaluation will take into consideration your age and other factors that influence your investments. For example, the risk-taking capability of a 30-year-old will be different from a 60-year-old person.  Hence their choice of equity will also vary.  

2. Long positions 

Taking long positions with your stock means to buy them at a lower price and selling them when the price rises. The stock is purchased under the anticipation that the price will increase.

3. Buy companies with strong fundamentals 

Invest in companies with a history of growth. Check the demand for the product that the company makes, its sales and earnings.

4. Exercise call options 

In a call option, the investor can buy a stock at a particular price called the strike price at a specified date. When the stock prices move beyond the strike price, the investor has the option of buying the stock at the lower strike price and then selling it in the open market at a higher price, thereby making a profit.

5. Buy fallen stocks 

Before the bull run, the bear market presents the opportunity to buy stocks at a price near their book value. You can purchase shares of companies with good growth at a lower price in this phase.

6. Diversify your portfolio 

Before you start adding stocks to your portfolio, analyze your situation and diversify not just in stocks but also in non-equity products such as bonds and bank savings.

7. Choose different stock classes 

Small-cap stocks have the capability of phenomenal growth but are commensurate with greater risk. A large-cap stock is a known market leader. Your portfolio should comprise different stock classes and not focus on one.

8. Choose various industries 

Certain industries will bounce back when the economy flourishes, and people start to spend again. Cyclical stocks such as housing, automobile, technology industry and industrial equipment are likely to gain from growth in the economy.  

Also Read:Everything You Need to Know About Mutual Fund Investment Options.

Avoid making mistakes:

Every investor should try to avoid making the following mistakes in a bull market;

1. Trying to time the market

Inexperienced investors generally look at maximizing profits by trying to buy as cheaply as possible and, of course, selling at a super-premium. However, predicting market movement is a futile exercise. Even the best of pundits advise against such a strategy. You might as well play roulette with your hard-earned money.

If you have invested in specific stocks, studying the technical charts and company reports will give you a more robust understanding of how the stock will perform over some time, irrespective of market sentiment. Your investment strategy should be goal-oriented, not sentiment-oriented.

2. Experimenting with trading strategies

Trading and investing are two very different strategies. While traders look to generate profits over a short period, investors aim to create wealth over the long term. Trading requires a considerable amount of time, expertise, and experience. It is a full-time project, not advisable for the retail investor.

3. Following the herd mentality

In a bull market, hot stock tips get passed around like the flu virus. You hear stories of overnight millionaires. Most of these tips are for mid-and small-cap scripts. The upsurge is usually because of the market rally and is seldom backed by fundamentals.

Information always has a trickle-down effect. If you’re not an investment professional, by the time the advice reaches you, you’ve probably already missed the bus. Further, during the downturn, such stocks could wipe out your earnings. It is best to opt for midcap-based mutual funds, rather than directly taking on the exposure. 

4. Compromising on asset allocation

In a rally, everyone feels they have the Midas touch and tend to over-leverage investments towards a particular asset – in this case, equity. It is important to stay true to your asset allocation mix, which is a combination of your long-term investment goals and inherent risk appetite.

Diversify your portfolio across asset classes to optimize your returns while incurring minimal risk. While bank deposits may not look lucrative now, they provide much-needed stability to your investment portfolio.

 5. Letting go of your SIPs

Even with the best of bull runs, there are bound to be pockets of volatility. Investors tend to stop their Systematic Investment Plan (SIP) investments in a bull market, thinking they can deploy the funds better elsewhere. Conversely, in a bear market, they tend to withdraw the same on the account of the loss of value.

SIPs function on the principle of ‘rupee cost averaging’, wherein you can buy more units when the prices are low and fewer units when the stock trades at a premium. Over the long-term horizon, a SIP will give returns that are comparable with the best-performing stocks.

Also Read: Want To Invest In SIP? Here Is a Complete Guide On SIP And Investment Calculator


The stock market posts positive returns in the long term. However, if you are looking to make the maximum out of a bull market, it is necessary to take some time before making an investment decision.

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