On Monday, 11 December 2023, the BSE Sensex touched 70,000 for the first time in its history. The bullish run gathered steam after the BJP’s win in recent state assembly elections. The bull market brings a feeling of anxiety for investors. They think how to trade this bull markets and how to go about investing? A small investor fear that the correction in market could be round the corner hence they go for wait and watch strategy but what exactly should they do in such circumstances? Here are some bullish market strategies:
1. Look for quality stocks
Many companies, both good and bad, are rising with the market at the start of a bull market. The markets are growing increasingly picky as the bull market develops, rewarding only a select group of companies at higher valuations. A bull market's fundamental guideline is to progressively shift toward quality. You need to gradually transition to safety as market valuations rise.
2. Stick to your financial plan
In a bullish market, that is your best option. Your financial plan specifies how much money should be allocated to debt, liquid assets, gold, and stocks. Stick to that and return it to the original amount as soon as your allocation deviates from it.
3. Churn profit
Booking profits and churning investments can be compatible with your long-term investing strategy. It is said that "If something is too good to be true, then it is probably not true" is a fundamental of the stock market trading. This rule applies when the markets are continuing on bullish trajectory. Even though you can re-enter the same stock at higher levels, continue to take profits on a regular basis.
4. Go for a phased approach
Adopt the SIP strategy, it performs best during a bull market because it is always preferable to purchase in full during a bull market and hold onto it forever. Though, it is not as simple. You can never be too certain of the ideal entry point. Either wait too long, or enter a stock too soon and regret it. Even in bull markets, it is preferable to take a phased approach to investing. Adopt a phased approach to selling too. It's important to have a gradual approach to both investing and selling stocks—you should do both in stages. The higher the price at which you sell a stock, the better the stock is. If you take a gradual approach to selling a stock during a bull market, you should end up with a much better price.
5. Don’t sit with losses
Bull markets have the tendency to surprise people both ways. The best way is to be ready to leave at a specific price. That could be the price at which you are unwilling to risk losing money, or it could be the degree of technical support. In a bull market, a loss booking discipline is crucial in either case.
6. Follow the market momentum
In a bull market, small investors should heed this crucial advice. A bull market exhibits bidirectional behavior. Staying on the same side of momentum is important at all times. Selling against momentum in a bull market can result in significant losses. Simply pay attention to what the market is trying to say.
7. Hedge your risk
In a bull market, you never sure of the moment when the market starts correcting itself. The best course of action is to purchase options as a safeguard to reduce your downside risk. Options offer inexpensive loss protection.
If all the hype surrounding equity markets makes it seem like a risk you'd prefer to avoid, take a moment to consider whether you learned enough to make that determination. There are smart ways for the astute investor to share in the wealth that companies generate. Engage with the strength of knowledge and readiness.
