What are Bull Markets?

A major uptrend can last from several weeks to several months. These bull markets, as they’re known, are characterized by rising prices and growing optimism.

The markets are governed by two overarching macrotrends: bull markets and bear markets.  A bull market is defined as continuing as long as each successive advance of the primary trend peaks higher than the one preceding it. The converse is true for a major downward, or bear market.

It is difficult (some would argue impossible) for investors to precisely time these markets. That’s because markets often rise higher than most investors and analysts anticipate—and sometimes fall lower than they could possibly fathom.

For context, since 1926, a bear market has come along an average of about every six or seven years. The average bear market has lasted 1.3 years and with an average loss of 38%. And that number factors in the Great Depression. The average bull market has lasted 6.6 years with an average cumulative total return of 339%. Since 1926, it has been a bull market about 86% of the time.

There’s more than just timing, however. Investor sentiment is key—it’s the shift from risk aversion to risk-taking that bolsters stocks. There’s also the fear of missing out, or FOMO. In short, in mature bull markets, investors no longer fear losing money; instead, they fear that if they don’t buy an investment, they will miss out on a gain! They confuse lost opportunity with lost money!

Beware, however, that you can lose money even in bull markets. Individual stocks can go with or against the big trends. The two classic ways to lower your risk at the moment of purchase are buying on dips and buying partial positions with the intention of averaging up later. You can find all of this growth investment advice on the Cabot website. 

To learn more, download our free report, 10 Forever Stocks to Buy Now–and How to Find the Best Growth Stocks.