Bull Markets – Don’t Get Trapped by the Bull Markets

Investors love bull markets, and they hate them at the same time. There are few things in the investment world that are more potentially lucrative, but also extremely fragile, as bull markets. Identifying a bull scenario can mean different things for different people. Some people look at it as a situation where investors and the markets in general as optimistic about general investing gains and try to translate that optimism into revenue. Most investors want to see sustained positive returns before calling using the term bull, and that can mean several months to years of positive investing returns. Each investor should try to benefit from a bull scenario, but there should also be caution in every approach.

The best thing about bull markets is that the enthusiasm for positive returns can rub off on just about any security available. Companies love a surging market because it can help them to add value to their stocks that may have been losing value for quite a while. The infectious nature of bull markets is why so many investors make money when the market stays up. But it is also a time when some securities can appreciate in value that does not truly exist. Just as it can be difficult to predict when a market will spike, it can be just as difficult to predict when a market will take a nose dive as well.

But bull markets are not always things to be feared. People who know how to find a good investment value often do quite well in bull markets. The selling activity in a surging market is usually low. But that is usually among the stocks that have already seen an increase in value. Savvy investors can sense trends in a surging market and can apply those trends to a series of securities that could see an improvement in value that follows those current trends. It can lead to a run on an entire industry that the smart investor will know how to cash in on.

People who talk about bull markets always refer to the crash of the Internet-based businesses in the late 1990’s as an example of the dangers of trying to cash in on market trends. Bull markets are not always followed by bear markets, but if the collapse is deep enough then a bear situation could evolve. The smart investor knows how to read the signs and has the ability to maintain a smart portfolio in a surging market.

About Richard Wilson