Investment Strategies In A Bull Market

Picking individual shares to invest in is one thing and something that should be one with a degree of fundamental and technical analysis, but is is important to understand the impact of overall investment environment.

Understanding the general trends in the market may even be more imprtant than picking individual shares.

Bull Markets are when shares are consistently rising across a broad range of global indices and Bear Markets are the opposite, consistently falling shares. So, you just but at the bottom and sell at the top. Unfortunately it’s not as simple as that or we would all be millionaires. Spotting the end of Bear market and beginning of a Bull one are equally difficult. Likewise spotting the end of a Bull market before the Bear bites you is equally hard.

One of the hardest things to spot is the beginning of a Bull Market as they always start at he very depths of a Bear market when confidence is at an all time low. Indeed people have been so battered by the Bear that the mere thought of investing in shares again prompts some to look for the window ledges of tall building!

This doom will be all around in the form or declining company order books, staff lay-offs, currency crisis and people generally avoiding stock market investment in favour of virtually anything else.

Anyone can spot a bull market when it’s charging ahead but if you wait until then you may well miss out on the lions share of the gains to made.

So, what to look out for:-

  • First, that very gloom described above. When share prices have fallen so low that all the bad risk in a share price has been accounted for. With proper research solid company shares can be picked up at bargain prices.
  • Economic statistics start to stabilise. Consumer confidence shows signs of improvement. Company order books start to stabilise and even improve.
  • The media are much quicker to react in the digital age so look out for the so called ‘signs of green shoots’ reports.
  • Recruitment begins to, if not pick up, then stop falling. Unemployment tends to be a lagging indicator anyway but with more and more companies adopting more creative ways to reducing working hours, unemployment in itself is not a good indicator of a marked change in market sentiment.

So, look out for these indicators and when the signs look right consider taking the plunge. Getting in at the start of a sustained Bull run can produce outstanding results.

When investing look for bargains where companies share prices are at or below their book value. Choose appropriate industries with companies with strong fundamentals.

And diversify. Even in a rising Bull market there will be winners and losers.

Updated: October 14, 2011 by admin