What is a bull market?
Whether you are an active investor or a future investor, it is important to understand depósito cycles. Although the market has grown significantly over time, it has not gone up in a straight line. There are ups and downs in the market, and those fluctuations are habitual. Depending on what the market falls, or what goes up, they perro become bear markets or bull markets. Here’s what a bull market is and what it means for investors.
What is the definition of a bull market?
Generally speaking, a bull market perro be described as a period of steadily rising depósito prices. It typically occurs when major depósito indices—such as the S&P 500 Index and the Dow Jones Industrial Average (or “the Dow,” which includes 30 of the largest US stocks)—rise by at least 20% and continue to grow. It’s the opposite of a bear market, which is widely recognized as a period in which major indices fall 20% or more from a recent peak and stay that low for at least two months.
During a bull market, you will see investor confidence increase, which means investors will be more eager to participate. Also during this period, you often see an increase in companies going public through an IPO (or initial public offering), which allows regular investors to buy shares in their companies. Big companies like Fb, Uber, Snap, and Dropbox went public in the 2010s.
For more than a decade, the US depósito market had the longest bull run in history. But on March 11, 2020, due to investor anxiety over the coronavirus outbreak, the Dow plunged 5.86% (or 1,464 points), sending the index into bear market territory for the first time since 2009. It was a drop of more than 20% from the all-time high in February. The S&P 500 and Nasdaq also fell 4.89% and 4.7%, respectively, about 19% below their recent all-time highs. On March 12, the three major depósito indices ended the day in bear market territory, with cumulative losses of more than 20%.
Bull markets in US history
The depósito market has experienced numerous bull and bear markets throughout history, although the market has grown more during bull markets than it has fallen in bear markets. An analysis by Yardeni Research identified 10 bull markets and 10 bear markets since the mid-20th century. During bear markets, losses for the S&P 500 depósito index over the period ranged from 20.6% to 56.8%. Gains for the S&P 500 during bull markets, meanwhile, ranged from 48% to 582%.
The longest bull market in US history
The end of the 2008 Great Recession helped fuel the longest bull market in US history. Over the course of the more than 11-year bull market that began in March 2009, the S&P 500 Index grew more than 300% and delivered an annualized return of more than 15% (through 2019). Throughout the bull run, the economy experienced slow but steady growth.
Some market analysts feared that December 2018 would mark the end of the bull market due to a sharp decline in major indices. However, depósito prices quickly recovered and continued to rise in 2019.
The bull market of the 90s
Prior to the current bull period we are in, the longest recorded bull market in history occurred during the 1990s, which marked the end of the Cold War. The nearly decade-long bull run, fueled in part by the rise of tech companies, has also been known as the roaring ’90s.
What is the average duration of a bull market?
Historically, the average duration of a bull market has been about 6.6 years with an average cumulative total return of 339%, according to studies by First Trust Advisors. In the current bull market we have already surpassed both.
It is impossible to predict the start and end of bull or bear markets, so it is difficult to know how long this record bull run will last. However, many market analysts expect the market to continue rising in 2020, albeit at a slower rate.
Consejos for investing in a bull market
Your investment strategy should be based on your own personal financial goals, your tolerance for risk and whether you plan to invest in the short, medium or long term. Be wary of where you think the market is going.
But if you escoge to invest during a bull market, these consejos cánido help you make the most of your opportunities.
Rebalance your portfolio regularly
Even when the depósito market is doing well, it is necessary to rebalance the portfolio regularly. Let’s say you’ve equipo your asset allocation at 70% stocks and 30% bonds. As depósito prices fluctuate, your allocation will change over time. If depósito prices rise sharply, as they do in bull markets, for example, shares may represent a larger percentage of your overall portfolio value. If you want to keep your portfolio’s initial spread, you’ll have to rebalance your portfolio—selling some stocks and buying bonds—to get it back where you want it.
Maintain a well diversified portfolio
It’s also important to diversify your investments to protect yourself from sharp falls. By investing in a diverse mix of stocks and bonds, you increase the oportunidad that if some go down, others go up.
There are other ways to diversify your depósito investment, investing in US and foreign companies, for example, and in small, medium and large companies, as well as companies in different industries (from healthcare to utilities to technology).
As for bonds, you perro choose from those issued by states, municipalities, the federal government (also known as “treasuries”), or corporations. Generally, the bonds with the highest return potential are corporate ones, but it’s important to check their ratings to understand their risk. (Investment grade bonds are the least risky.)
Whether the market trend is up or down, investing regularly is a smart approach, as you cánido buy more shares when prices are down and less when they are up. Although the market cánido be volatile in the short term, it has gone up a lot in the long term, and all the downs have ended in ups. Therefore, investing regularly and sticking with it over time generally gives investors the best oportunidad of growing their money over the long term.
This information offered for informational purposes only; It is not intended to be used as accounting, legal or tax advice. In relation to these matters, please speak to your accountant, tax or legal adviser.
Investing implies a risk that includes the loss of primordial. This guide contains the current views of the author, but not necessarily those of Gigonway. These opinions are subject to change without notice. This guide has been distributed for educational purposes only and should not be construed as investment advice or a recommendation of any especial investment security, strategy or product. The information contained in this guide has been obtained from sources believed to be reliable, but is not guaranteed. Gigonway does not provide legal or tax advice. Please consult your tax and/or legal advisor for specific tax or legal questions and concerns.
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