How to Invest in a Bull Market

When the market is going up, it can provide you with many opportunities to make quick profits. The key is to not lose your perspective and buy in when the stock or ETF has already reached its high unless you are investing for the long term. But which strategies are the best ones? The answer to that depends upon your risk tolerance and time horizon. Here is how to invest in a bull market.

Table of Contents

  • Option strategies for a bull market

  • Why joining the herd can work

  • How a passive investment can help

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Buy Calls

If you think that a particular stock, index, or ETF has substantial upside potential, you can buy call options that will increase substantially in value over a relatively short period of time. For example, if ABC stock is currently trading at $50 a share and you think it will hit $70 a share within the next 90 days, then you could buy 5 call options with a strike price of $52. Then, if the stock performs the way you hope it would, you can sell those calls at a substantial profit before they expire.

You may want to buy a series of calls with staggered expiration dates so that you can get a stream of income coming in from the premiums that you collect. Then you can keep writing calls with new expiration dates as they come due and keep your cash flow constant.

Of course, if the stock does not perform the way you think-and hope-it will, then you may lose the entire amount that you invested in the calls. But buying call options is a much cheaper way to get in on the potential gain of a stock than buying actual shares. Each call option represents 100 shares of the underlying investment, so you can profit from the gains from a large number of shares without having to pay so much. This is a good example of how to invest in a bull market.

Sell Puts

This is another easy way to generate some extra income when the markets are rallying. You can sell naked put options on a stock, index, or ETF and collect the premiums from the sale until the price of the holding drops back down to your strike price. At that point, you can either close out your position or buy the actual shares.

This strategy makes the most sense when you want to buy a position in a particular security at a specific price that is below its current market price. Since you must wait for the stock, index, or passive investment to drop down to the price you want anyway, you might as well collect a few premiums from selling puts in the meantime.

Again, there is the chance that you will have to put the shares to the market maker at the strike price, but if you are wanting to buy the holding at that price anyway, then you have not lost anything. This is another good example of how to invest in a bull market.

Buy and hold

If you are investing for the long term, then the most sensible solution for you may be to just stay the course. You can sit back for the moment, enjoy the current bull run and reap the gains from it by doing nothing. Of course, the markets will inevitably go back down at some point. But the markets ultimately go up more than they go down.

If you are middle aged or younger, then you should probably just let your retirement portfolio cook for now. If you are less than five years from retirement, then it may be time to start thinking about reallocating some of your assets. For example, you could do a sector rotation into the growth-oriented holdings in your stock portfolio into other sectors. You may not have time to wait for the markets to recover if they drop drastically in a few years.

Invest in cyclicals

There are certain types of companies that rise and fall in tandem with the markets with a somewhat predictable cadence. Cyclical companies include sectors such as transportation, steel, heavy machinery, furniture, and the restaurant and hotel industries. Companies in these sectors tend to do well when the economy is on a growth spurt. But they often flounder when the overall economy is performing poorly.

The stocks of these companies therefore fluctuate at roughly the same times that the economy rises and falls. The key is to get in when a lean period of economic growth has just ended. Once that happens, then you can often get in on the ground floor of a growth spurt with these stocks.

Cyclical stocks are often at their best when interest rates are falling. This is because falling interest rates usually stimulate the economy. So it is usually wise to wait until you think rates are about to start rising again before buying. This way you can get in on the ground floor.

Many investors look at the P/E multiples of the companies they invest in. They will need to keep in mind that this strategy works counter intuitively with cyclical companies. When the P/E ratio is high for a given cyclical stock, then it is probably time to buy in. This is because this signals the end of the downturn. Meanwhile, a low P/E multiple typically signals the end of the growth phase.

Buy the index

Buying the index, such as the Dow Jones Index can allow you to profit from market growth in both the short and the long runs. If the index has been falling, you can wait until you think it has hit the bottom and then buy. If you can get in at the right time, then you may be able to reap a handsome profit within a relatively short time.

There are several ways that you can buy into an index. There are many ETFs that invest in various indices, so you can pick which index you want to invest in. If you are a market timer, you can buy the index while it is rising. Then you can get out when a selloff occurs. Indexes usually rise when interest rates are low. So, now may be a good time to get in if you want to.

Go with the herd

This option can be fraught with peril for those who assume that the masses always know what they are doing. But you may be wise at times to take stock of what most other investors are doing. For example, if you notice that many investors are picking up a large-cap stock right now, then you might want to get a few shares for yourself.

But remember that the majority is often wrong when it comes to investing. Millions of people were getting out of the market back in 2008 when they should have been buying or holding. When the stock markets fall, this should generally be viewed as a buying opportunity in most cases.


These are just some of the ways of how to invest in a bull market. The different strategies we have described are to give every investor a strategy which fits their risk tolerance. In a bull market everyone makes money, so select the strategy which will allow to sleep soundly at night. Remember a sell off is never far away!

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