Where to invest in a bull market?

21st Nov 2009 by cocacolabuffet

In a bull market, the best place to invest is those assets with high betas, high growth and/or pro-cyclical.
High beta assets are highly correlated with the broader market and have larger swings to both the up and downsides than the broader market. For example, suppose the S&P 500 rises by 10%, an individual stock with a beta of 3 theoretically will rise by 30%.
A bull market generally is filled with investors with risk appetite, chasing high returns at the cost of high risks. High growth assets fit this profile. Examples of high growth assets are investments in emerging markets, high-tech companies in general, companies with double or triple digit growth rate in revenues and/or income year over year.
A bull market is generally accompanied by a booming economy. Cyclical assets are pro-cyclical or positively correlated with the macro-economy. Examples of cyclical assets are most commodities, retailer companies, luxury goods, real estates, transportation sectors etc.


This answer is the subjective opinion of the writer and not of FinancialAdvisory.com