The Best Investments in a Bull Market
With the American stock market in its longest bull market in history, it’s only natural to think that now might not be the best time to pour money into the market. And you wouldn’t be alone in that thinking, Baron Rothschild’s quote has become a popular one, “the time to buy is when there’s blood in the streets”. But advice for wise investments in a robust economy is a little tougher to come by. Here are a few proven strategies for investing in a bull market.
Sometimes it pays to go against the grain
Contrarian investors, as they have come to be known, profit off of the inherent volatility of the market. When a stock soars, they initiate a short. Sharp dips are seen as opportunities to scoop up as much as they can. They know that large selloffs can sometimes result in a big bounce, and after they bought their stock at a steep discount, they stand to benefit from the strongest return on investment. The psychology of this is simple but effective. As a stock soars, the crowd jumps on the bandwagon with everyone hoping to make some easy money off a proven winner. Fear of Missing Out or “FOMO” can be a powerful persuader for those who let their emotions get the best of them. The contrarian knows that this is not sustainable, and a correction is usually in the works. The more prices swing, the more the contrarian benefits. Savvy investors can use this strategy to benefit from the irrationality of the crowd.
Best bets for 2020
Environmental, social and government (ESG)- Some analysts say that environmental, social and governance (ESG) stocks are a great bet right now. Take a look at our article from a few weeks ago taking a deeper dive into responsible investing. As the price of green energy falls and the general public starts to demand a more sustainable energy sector, stocks that follow ESG guidelines are primed for quite a bit of growth over the next decade.
Value Stocks- This might seem obvious. By its very definition, a stock that is trading at a price much lower than its fundamentals and inherent value is a pretty good bet. Usually, once the bargains seem too great to pass up, the public starts to snatch them up and the price moves towards more of an equilibrium with its fundamentals.
As always, stick to your long-term growth plan. A highly diversified portfolio might not give you enormous returns in the short-term, but history serves as a reminder that it will undoubtedly help you weather any storms and very likely pay off consistently in the end.