Top Investment Strategies for a Bullish Stock Market

You will certainly face strong temptations to take on additional risk as prices rise. If you let these temptations influence your behaviour, contagious excess confidence (even euphoria) can lure you into taking on a level of risk that will leave you vulnerable to any sudden, unexpected decline.

Belief in long-term investment strategies can guard against these risks – here are some: 1. The buy and hold 1.

Buy and Hold

Others invest in ‘buy and hold’ funds – or low-cost index shares – assuming that their stock will continue to increase in value whatever the market does. Typically, investors are comfortable banking on this long-held trust in their stock rising over time, particularly when bull markets drive fast-growing prices. Investors who approach investing this way potentially benefit from compound interest to produce exponential growth in value, because each month’s interest earned can be rolled over to the next month, and if dividends are paid into the share identities their value too will most likely grow. Other long-term do-nothing investing strategies are buy-and-hold and dollar cost averaging which both reduce transaction costs, as well. When you buy and sell stocks, you often pay a fee to your advisor or trading company; if you buy and hold a stock, your transaction expenses are significantly reduced. This do-nothing strategy is a good fit for your money if you own large sums of cash and will not use it for at least a few years, and for accumulating funds for more long-term costs like retirement or college tuition. You can use this strategy to avoid more risky and/or short-term options such as bonds and cash alternatives.

Diversify

Certainly what can happen is investors may experience the biggest risk of a bull market: investing too heavily in top‑performing equities, especially through a 401(k) workplace retirement plan or via an individual retirement account (IRA), conventional or Roth. Adding assets from different sectors and asset classes to a portfolio ensures that, if one sector tanks, you’ll see gains from elsewhere, and that an optimally diversified portfolio also increases the amount of assets with low or negative correlations. Diversification might take some forethought, but there are easy ways to diversify properly: owning an index fund will instantly diversify you, tracking a broad basket of stocks. And by regularly checking your portfolio – including returning to your asset mix on a monthly, quarterly, or annual basis (whatever seems most reasonable and realistic to you) – you can reduce risk while boosting long-term performance. Just avoid picking asset classes or timing the market to take advantage of market tops or bottoms wherever you can.

Rebalance Your Portfolio

Rebalancing is most effective in bull markets, when stocks tend to outperform bonds, and so the mix of equities in a portfolio becomes disproportionately high. The problem is that equities are riskier investments than bonds, so you leave yourself wide open to risk. Rebalancing means selling some of your overperforming assets and using the proceeds to buy some of your underperforming assets, thereby restoring your asset allocation to its former percentages, and aiding you in risk management while giving you the flexibility to adjust your allocations as necessary. Your portfolio should be rebalanced regularly – quarterly or yearly perhaps, or as a percentage. Fortnightly rebalancing is probably a waste of your time, unless you’re looking for trading action; if you only have 200 shares and plan to sell half, the cost of selling and buying will be far too high. Once you’ve set your rebalancing criteria more or less correctly, you can set yourself in motion and relax. How do you ‘relax’ in the investing world? Apart from understanding your risk, an important tool is to set boundaries, and one established within the style boxes that informs further investment decisions is portfolio rebalancing. You either rebalance on some schedule – every quarter, every year, perhaps even every month – or as a percentage. Scheduling rebalancing lets you set boundaries such as ‘no more than 20 per cent of my portfolio in value shares’; percentage rebalancing means you rebalance once new money goes into your portfolio. Compile a spreadsheet of all your accounts and asset allocations, then review line items to determine if the portfolio is overweight in any area – for example, if growth stocks have soared relative to international issues over the past 12 months, your portfolio may have become more heavily skewed to equities than was originally planned.

Look for Breakouts

But it can also be used as an effective breakout-buying strategy in bull markets – just with the knowledge that you are taking risk. A breakout can really be any type of stock that blows through a support or resistance level when the level has increased volume. They can occur on any type of market and can be affected by several different factors; however, breakouts play a key role in technical analysis of stocks because breaching resistance can take a stock higher significantly as stocks that break above may become very strong but stocks that break support may continue to fall. Look at key support and resistance to find potential opportunities of a breakout. Check based on previous price actions the level by using trend line or horizontal lines, to get a guide hand for your further action. After, scan for chart pattern that are sometimes be found in triangles or flags, and check the possible situation in a breakout might happen; but make sure it is on high volume or else not, prove its strength by verifying on your strategy (depend on the timeframe your did for trading).

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