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6 Best Stock Investing Strategies to Use During a Bull Market


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The stock market is often thought of as the battle between the bulls who believe stock prices will rise and the bears who believe stock prices will fall. As the battle wages, valuations fluctuate, creating opportunities for investors to make money by buying and selling stock.

Savvy investors know that it’s wise to change your investing strategy as market conditions change to ensure you’re taking advantage of opportunities while avoiding losses as certain financial assets come in and out of favor.

Successfully investing during a bear market, when stock prices are broadly falling, can be challenging. Bull markets, by contrast, are a time of optimism and widespread opportunity in the stock market. If you’d like to join the running of the bulls on Wall Street, continue reading.

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What Is a Bull Market?

A bull market is a period of time in which valuations across the overall market are headed higher. So, does that mean when stocks are up for a single session or a single week, a bull market is in play?

Not necessarily.

The market is a volatile place, and prices across the stock market will fluctuate from day to day. Even in down markets, there will be positive days. In bull markets, negative days will happen.

So, what exactly is a bull market?

By definition, a bull market takes place when prices across the stock market rise by 20% or more from their most recent lows. History shows that when this happens, it’s safe to assume that a market downturn has fully reversed and upward movement is likely on the horizon.

Bull markets are heavily correlated with economic growth. As economic activity increases, publicly traded companies tend to generate more sales and earnings, increasing demand for stocks, and ultimately leading to price appreciation across the equity market.

Best Investing Strategies to Deploy in a Bull Market

There are several investing strategies to deploy in order to expand your profitability in the stock market. Some of these strategies are best deployed in bear markets while others are best used in bull markets.

Investing strategies designed to capitalize on a bull market are focused on taking advantage of the strong momentum in the upward direction that stocks tend to see during an uptrend in the market.

1. Growth Investing

Growth investors look for relatively young companies. The idea is that these smaller companies have more room to grow, and you have the opportunity to share in that growth by investing in them.

Growth investors measure the past performance of a company and the rate at which earnings are growing. If earnings are growing faster than industry averages and are expected to continue in the right direction, the stock may be a perfect target for an investment.

The growth investing strategy requires the use of detailed fundamental analysis. Because the companies you’ll be investing in are smaller, they don’t have the financial stability large-cap blue-chip stocks have. As a result, it’s important to do your research and make sure that the companies you invest in have a high probability of future success.

2. Value Investing

Value investing in the stock market is equivalent to bargain hunting at your favorite retailer. The idea is to find undervalued stocks you can snap up at a discount. Then, when valuations run to more realistic levels, you can sell the stock, earning a profit in the process.

The value investment strategy is a perfect strategy to deploy in the beginning and middle of a bull market. During these times, companies with strong intrinsic value may lack the demand needed among the investing community to push the stock into a recovery from the recent bear market. This delayed recovery represents an opportunity.

By buying in while the stock’s valuation is low, you’re essentially getting a discount on future growth. That discount becomes your profit. When looking for strong value investments, it’s important to pay close attention to valuation metrics like price-to-earnings ratio, price-to-book-value ratio, and price-to-sales ratio. By comparing these metrics to industry averages, you’ll be able to tell if the valuation of the stock you’re interested in is high, low, or right at fair market value.

3. Buy Call Options

Call options are contracts that can be bought and sold, which give the buyer the right, but not obligation, to purchase shares of a stock at a predetermined price at a future date. You pay a small fee to buy the option, but that fee could result in big gains.

For example, let’s say stock ABC is currently trading at $10 per share. You buy call options for a fee of $0.10 per share. Two weeks later, the stock rises to $13 per share, so you exercise your option to purchase shares, buying each share at $10 and immediately selling them for $13 each. In this example, your total cost per share is $10.10, meaning that you’ve generated a profit of $2.90 per share.

Call options are popular in bull markets because they give the buyer the ability to control a large number of shares of a stock they believe will see an increased valuation with little upfront capital. Moreover, call options limit your losses to the price of the option itself. So, should your investor’s intuition be off, your losses will be limited to the fees you paid.

4. Invest In Cyclical Stocks

The term cyclical represents a binary concept. Stocks that are cyclical are heavily correlated with economic activity. When economic growth is the norm and markets move into bull territory, cyclical stocks tend to do well. Conversely, when economic activity slows and a market downturn hits Wall Street, cyclical stocks tend to fall.

Considering the nature of cyclical stocks, they are a great choice for investors looking to profit from bullish market activity. But what exactly are cyclical stocks?

Some of the best categories for stock picks during bull markets include:

  • Tech Stocks. When economic conditions are tough, consumers are willing to hold off on buying the latest and greatest in tech, often sending prices down. On the other hand, when economic conditions are positive, consumers are more likely to spend on tech, sending the sector for the top.
  • Travel Stocks. Travel is another category of spending that tends to slow when economic conditions are concerning. However, when economic conditions are positive, consumers are more likely to take vacations, pushing values in the sector for the top.
  • Real Estate Stocks. When economic conditions are negative, the Federal Reserve generally reduces the interest rate it charges, which equates to lower rates on loans. As the market recovers, interest rates gradually increase. At the beginning of the recovery from a recent downturn, interest rates will be low and consumers will begin to be more likely to spend. This is when the real estate market tends to see a bit of a boom. So, if you can catch it at the beginning of a bull market, real estate is a great way to go.
  • Automobile Manufacturers. Automobile manufacturers are some of the toughest hit companies during tough economic times. However, they’re one of the first to recover during a recovery, making them a great investment decision if the bulls are running on Wall Street.

5. Invest In Index Funds, ETFs, and Mutual Funds

As an investor, you’re often told to diversify your investment portfolio. After all, with a heavily diversified portfolio, should one or two of the stocks in your portfolio go through a market correction or rapid decline, your overall portfolio won’t take significant losses.

Index funds, exchange-traded funds (ETFs), and mutual funds are designed to give the investor exposure to the entire stock market, an entire sector, or an entire asset class. These are bucket investments with built-in diversification, many of which are great for bull markets.

Index funds are great because they provide exposure to an entire market index, like the Nasdaq or Dow Jones Industrial Average. When choosing ETFs and mutual funds in bull markets, look for those that are designed to give you exposure to the entire market, like the Vanguard Total Stock Market Index Fund.

By investing in these funds, you’ll end up with an investment portfolio that’s built around diversification. Moreover, you’ll have exposure to entire categories of the stock market, meaning that as the market as a whole sees values climb, your portfolio value follows.

6. Allocate More to Small-Cap Stocks

Small-cap stocks are smaller, generally younger companies that are still trying to find their footing on the commercial scene. These stocks come with increased risk because they haven’t yet proven their abilities to generate big-time profits to investors.

Nonetheless, positive economic times and bull markets give small-cap stocks a boost. With positive economic conditions, consumers have more money and are more willing to spend. At the same time, during bull markets, investing dollars are more widely available on capital markets, giving many smaller companies the funding they need to grow.

If you have strong fundamental analysis skills and are looking for a high risk, high reward opportunity to take advantage during bull markets, the small-cap sector may be just what your investment portfolio needs.

Keep in mind, the smaller the market cap of a company, the higher the risk. So, if you’re going to give a higher level of asset allocation to these stocks, make sure that you understand your risk tolerance and do intense research before each investment so you know exactly what you’re putting your money into.

Pro tip: If you’re going to add new investments to your portfolio, make sure you choose the best possible companies. Stock screeners can help you narrow down the choices to companies that meet your requirements. Learn more about our favorite stock screeners.

Even In Bull Markets, Losses Occur

Bull markets are exciting times for investors. Valuations across the equities market make their way for the top, and many thousandaires at the beginning of a bull market become millionaires by the end.

As a result, when bull markets take place, those who haven’t participated in the stock market in the past are suddenly intrigued and start to invest. While that’s great news, one of the big issues is the misconception that any stock investment is a good investment during bull markets.

That’s not the case.

Whether you’re investing in bull markets or bear markets, there will be good apples and bad apples. Although your probability of making successful investment decisions is increased during bull markets, blindly investing in stocks without research will often lead to losses, regardless of where the overall stock market is headed.

Investments to Avoid In Bull Markets

While the overall market sees significant gains in bull markets, some assets will outpace others. Moreover, there will be some investments that lead to losses during positive market trends. In particular, here are the assets that you’ll want to avoid during bull markets:

  • Precious Metals. Precious metals are one of the most widely recognized safe-haven investments in the world. This means that during bear markets, investors flock toward these investment opportunities as a way to protect their portfolios from losses. However, when bull markets take hold, investors tend to sell their precious metals holdings and look to equities as a way to take advantage of the upward trends. This leads to declines in precious metals prices.
  • Fixed-Income Investments. Fixed-income investments are popular among retirees. They’re also popular during bear markets because of the income they provide. However, in bull markets, the returns from fixed-income investments tend to come up short when compared to the overall market. Although they are an important part of any diversification strategy during any market conditions, asset allocation geared toward fixed-income investments should shrink substantially as the bulls take control over the stock market.
  • Inverse ETFs. Inverse ETFs are designed to move in the opposite direction of their underlying assets. Naturally, that makes them a great option for profiting during bear markets. However, in the bull market, inverse ETFs will generally lead to losses.

Final Word

Investing in a bull market is exciting. With the vast majority of equities finding their way to the top, this is when new investors like to start participating on Wall Street.

Nonetheless, a bull market should not be mistaken for an event that will guarantee strong returns. At the end of the day, there are plenty of investments that will perform poorly even when the overall market is performing well.

As a result, it’s best to do your research before making any investment decisions. After all, educated investment decisions tend to be the most profitable.

By following the investing strategies listed above, you’ll have the potential to take the next bull by the horns and greatly expand your wealth.


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Joshua Rodriguez has worked in the finance and investing industry for more than a decade. In 2012, he decided he was ready to break free from the 9 to 5 rat race. By 2013, he became his own boss and hasn’t looked back since. Today, Joshua enjoys sharing his experience and expertise with up and comers to help enrich the financial lives of the masses rather than fuel the ongoing economic divide. When he’s not writing, helping up and comers in the freelance industry, and making his own investments and wise financial decisions, Joshua enjoys spending time with his wife, son, daughter, and eight large breed dogs. See what Joshua is up to by following his Twitter or contact him through his website, CNA Finance.