Or, let’s say that a particular company reports poor earnings and its stock drops by 30%. We could say that the stock’s price has fallen into bear market territory.
The terms bear market and stock market correction are often used interchangeably, but they refer to two different magnitudes of negative performance. A correction occurs when stocks fall by 10% or more from recent highs, and a correction can be upgraded to a bear market once the 20% threshold is met.
- Causes of a bear market
- How to invest in a bull market
- Invest in cyclicals
- How to invest in a bullish market
- How to invest in a mature bull market
- What is a bear market?
- How should you invest in a bull market
- How to invest money in bull market
- The 1990s bull market
- What’s the average length of a bull market?
- Invest regularly
- How to invest in a bull market24
- How to invest in a bull marketapp
- Go with the herd
- How to invest in a bull marketing
- Sell Puts
Causes of a bear market
The usual cause of a bear market is investor fear or uncertainty, but there are a multitude of possible causes.
How to invest in a bull market
But the markets ultimately go up more than they go down.
If you are middle aged or younger, then you should probably just let your retirement portfolio cook for now. If you are less than five years from retirement, then it may be time to start thinking about reallocating some of your assets.
Invest in cyclicals
There are certain types of companies that rise and fall in tandem with the markets with a somewhat predictable cadence.
Cyclical companies include sectors such as transportation, steel, heavy machinery, furniture, and the restaurant and hotel industries.
How to invest in a bullish market
FOMO or Fear of Missing Out comes into play during such times – “If I don’t invest now it will rise even higher tomorrow & I’ll miss out on the gains!” But remember that any event can cause them to reverse course and start declining. The last thing you will want is to get caught and fall victim to the market cycle.
Therefore it’s always smart to invest smaller chunks of money regularly and spread-invest over longer periods of time. Opt for SIP or STP based on your needs and requirements and make the most of this bull run.
It’s easy to deliver returns when the entire market is on the rise, but wealth is not generated in one or two years.
How to invest in a mature bull market
Let’s take a look at the actual definition of a bear market, what causes a bear market to occur, the difference between a bull market and a bear market rally, and other key concepts investors should know.
What is a bear market?
A bear market is typically defined as a 20% drop from recent highs. The most common usage of the term is to refer to the S&P 500‘s performance, which is generally considered a benchmark indicator of the entire stock market.
However, the term bear market can be used to refer to anystock index, or to an individual stock that has fallen 20% or more from recent highs.
For example, we could say that the Nasdaq Composite plunged into a bear market during the bursting of the dot-com bubble in 1999 and 2000.
How should you invest in a bull market
It is equally important that your money should keep earning decent returns during any and all market cycles, and not only during the bull run. Your investment decision should be made after checking the performance during different market cycles and not only on a single-year performance.
But understand that this can be a very risky strategy, because there is a chance that these sectors are in a bubble right now.
How to invest money in bull market
Throughout the bull run, the economy saw slow yet steady growth.
Some market analysts were concerned that December 2018 would mark the end of the bull market due to a sharp drop in the major indexes. However, stock prices bounced back quickly, and continued to rise in 2019.
The 1990s bull market
Prior to the current bull period we’re in, the longest bull market recorded in history happened during the 1990s, which marked the end of the Cold War.
The nearly decade-long bull run, driven in part by booming technology companies, has also been referred to as the Roaring ’90s.
What’s the average length of a bull market?
Historically, the average duration of a bull market has been around 6.6 years with an average 339 percent cumulative total return, according to First Trust Advisors research.
There are additional ways to diversify your investment in stocks, by investing in both U.S. and foreign companies, for example, and in small, mid-sized and large companies and companies in different sectors (from healthcare to utilities to technology).
When it comes to bonds, you can choose from those issued by states, municipalities, the federal government (also known as “treasuries”) or corporations. Generally, the bonds with the highest potential for returns are corporate bonds, but it’s important to check their ratings to understand how risky they are.
(Investment-grade bonds are the least risky.)
Invest regularly
Whether the market is trending up or down, regularly investing is a smart approach as you can purchase more shares when prices are down and fewer when they’re up.
How to invest in a bull market24
If you keep waiting for that dip to start investing, you could remain sitting on the sidelines with cash in hand during a (possibly) multi-year bull market. It goes without saying that keeping cash idle while waiting for that perfect entry point is not the way to fulfill your investment goals.
You’ll miss the existing chance of increasing your wealth.
How to invest in a bull marketapp
Then you can get out when a selloff occurs. Indexes usually rise when interest rates are low. So, now may be a good time to get in if you want to.
Go with the herd
This option can be fraught with peril for those who assume that the masses always know what they are doing.
But you may be wise at times to take stock of what most other investors are doing. For example, if you notice that many investors are picking up a large-cap stock right now, then you might want to get a few shares for yourself.
But remember that the majority is often wrong when it comes to investing.
How to invest in a bull marketing
For example, if ABC stock is currently trading at $50 a share and you think it will hit $70 a share within the next 90 days, then you could buy 5 call options with a strike price of $52. Then, if the stock performs the way you hope it would, you can sell those calls at a substantial profit before they expire.
You may want to buy a series of calls with staggered expiration dates so that you can get a stream of income coming in from the premiums that you collect. Then you can keep writing calls with new expiration dates as they come due and keep your cash flow constant.
Of course, if the stock does not perform the way you think-and hope-it will, then you may lose the entire amount that you invested in the calls. But buying call options is a much cheaper way to get in on the potential gain of a stock than buying actual shares.
While the market can be volatile in the short run, it has risen significantly over the long run—and every downturn has ended in an upturn. So investing regularly and sticking with it generally allows investors the best chance to grow their money over the long term.
Investing involves risk including loss of principal.
This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.
Each call option represents 100 shares of the underlying investment, so you can profit from the gains from a large number of shares without having to pay so much. This is a good example of how to invest in a bull market.
Sell Puts
This is another easy way to generate some extra income when the markets are rallying.
You can sell naked put options on a stock, index, or ETF and collect the premiums from the sale until the price of the holding drops back down to your strike price. At that point, you can either close out your position or buy the actual shares.
This strategy makes the most sense when you want to buy a position in a particular security at a specific price that is below its current market price.
