A bull market implies to a sustained period of rising stock prices, and tends to go hand-in-hand with investor confidence and positive market sentiment. This is commonly reflected in popular investor sentiment metrics, such as the Fear and Greed Index or the VIX. As investors see improvement in economic conditions, they are likely to expect these improvements to ultimately result in high business profits. As per Kavan Choksi UAE, this helps in promoting more trade and increased stock values, and investors position themselves to gain from stronger earnings going forward.
Kavan Choksi UAE briefly talks about a few strategies for investing in a bull market
One would not be able to profit from a bull market unless they are invested in stocks. Therefore, it is vital to check the asset allocation in the portfolio first. This can be a good time to increase exposure to equities and lower exposure to bonds and cash. It however is vital to proceed with caution as market conditions can change pretty fast. A true bull market can be slower to materialize than one may expect. Moreover, investors should not simply assume that stocks are only going up from here or invest in cash they might require in the next five years.
Rather, it is better to hold a good mix of stocks, bonds and cash for the bull market. In case an investor is not sure about what this mix should be, they must try the Rule of 110 for an age-based allocation. This would involve subtracting the age of the investor from 110 and investing that percentage of the portfolio in stocks. For instance, if an investor is 40, their allocation as per this strategy would be 70% stocks and 30% bonds and cash. Having such a portfolio composition would prepare the investor for a broader range of scenarios, as opposed to going all-in on stocks. In case one does increase their stock exposure, it is better to add equities from several industries. Industry diversification can help in protecting the investor from sector-specific weaknesses and can provide them access to sector-specific strengths.
As per Kavan Choksi UAE, growth stocks and sectors generally appreciate faster than peers and the overall market. A large number of growth stocks are innovative but young company that focus on making use of technology to create efficiencies or solve global issues. These stocks usually do perform well in bull markets, but can be a risked investment in comparison to more stable and well-established companies.
Value stocks are basically equities that appear to be underpriced. This basically means that they are trading for less than their intrinsic value. Such situations generally come up when investors overreact to bad news, or if the investment climate favours faster-growing assets. Optimistic bull-market investors generally prefer faster-growing assets. Therefore, value stocks are quite likely to lag when the market is especially strong. This can be a great buying opportunity for patient, long-term investors. Value stocks typically show their worth in bear markets, and many of them are likely to pay dividends as well. Investors may use a bull market to increase the value stock holdings in an efficient manner, preparation for the next bear market.
