The types of securities that perform well in a bulls market are those that have volatile correlations with cyclical market swings. There are certain securities that tend to rise faster and drop further than the market as a whole. When the returns of a security trails closely with the market direction (bull or bear), it is referred to as cyclical. When the price of security rises or falls quickly it is called volatile in nature. Volatile and cyclical securities include securities like exchange traded funds (ETFs), stock and mutual funds. Mutual funds are considered to be more aggressive than other securities. Safer investment options that have lower volatility with lower cyclical sensitivity are less like to gain from the rewarding bull market. If you want to earn from a bull market, you can make certain changes in your portfolio or trading strategy to magnify your gains. According to the experts of Corner Trader, you must add more volatile and cyclical securities in your portfolio and reduce safer securities like bonds when the bull market is in full swing. Here are the securities that you can add to your portfolio. Stocks Stocks, also known as shares, are one of the widely traded securities. Usually, people like to invest in the stock market because it offers the opportunity to make huge profits in smaller period of time. Stocks have same amount of risk factor as well. There are two ways to earn from stock market. You can either earn from dividend paid by the company or you can earn by buying and selling stock. In a bull market, you can sell at a higher price than the original purchase price. Not every stock is sensitive to market changes. Therefore, you have to choose wisely. Stocks of larger and stable companies of calmer sectors are less volatile and are not very sensitive to market cycles. Stocks of smaller and riskier companies on the other hand, perform better in the bull market. ETFs Although ETFs have started to exist lately, these market securities perform better in bulls markets. Unlike mutual funds, ETFs are pools of stock that can be traded like individual stocks in the open market. By timing your transactions you can enjoy the capital gains by trading ETFs. Generally, ETFs are considered less risky than stocks. Buts as stocks are the underlying assets of ETF, you will benefit they fetch gains from bull markets in similar manner. Mutual Funds Mutual funds can be called a combination of stocks and bonds. These are securities that are managed by large investment companies. Although the investors buy the mutual funds, they do not hold the right to make decisions about the securities held inside them. The money that the investor invests in the mutual funds is controlled by the professionals. Mutual fund can be 100% bond or 100% stock funds. Mutual funds that are 100%stock or have more stock percentage perform better in the bulls market. Mutual funds with bond qualities also perform better than individual bonds. These are some securities that will fetch more profits for you during a bull market. You can also increase your benefit by taking long positions and implementing call option strategy.
Technology shares are a prime example of bullmarket stocks - they fly high on hope value when sentiment is good and fall flat when markets are looking for back bone. It is no coincidence that utility stocks tend to outperform in troubled markets - long term steady income and decent dividend yields.
