What Is a Bull Market?

  • Bull markets typically last over four years and gain nearly 150% on average.
  • Bull markets last longer than bear markets.
  • Trying to time the market with your investments, even during a bull market, usually ends up underperforming market benchmarks like the S&P 500.

Have you ever gotten investment advice from your Uber driver? Or maybe family and friends start giving you “hot stock” tips?

These may be signs that we’re in a bull market.

A bull market is when stock prices rise and there is positive economic sentiment — hence everyone seemingly jumping on the investment train. 

There’s no question that investing is always important. But how should you invest when you’re in a bull market?

. . .

Bull Market Definition

A bull market is defined by the Securities and Exchange Commission as “a time when stock prices are rising and market sentiment is optimistic.” 

While this definition is a bit general, most experts agree that a rise of 20% in stock market prices indicates that a bull market has started.

There have been 16 bull markets since 1942, according to research from First Trust. These bull markets had an average length of 4.3 years and an average cumulative total return of 149.2%.

During bull markets, there is usually an initial 20% rise from recent stock market lows and consumer sentiment becomes positive. 

The longest bull market recorded during this timeframe was 12.3 years — starting in 1988 and ending when the tech bubble burst in 2000. 

During that time, the S&P 500 rose 582.1% overall — an average of 16.9% per year!

Characteristics of a Bull Market

Bull markets are measured as an overall rise in a broad-based stock market index, such as the S&P 500. 

These market indices track the value of hundreds (or thousands) of stocks — and give analysts a benchmark to see how the overall market is doing.

The rise is usually coupled with the following:

  • Increased corporate revenue and profits, which helps boost stock prices. People invest more into companies, the companies turn a larger profit, and the cycle continues.
  • Positive consumer sentiment, with more investors participating in the stock market. 
  • Lower unemployment (usually).

However, while a rise in prices and consumer sentiment may indicate a bull market, if the prices quickly drop again, you could have a down market (or “bear market”). 

Defining a bull market isn’t black and white — sometimes you can only define a bull market after it has happened.

READ MORE: Investment Terms to Know If You’re a Beginner Investor

Bull market vs. bear market

While a bull market is marked by a 20% increase in a stock market index and positive consumer sentiment, a bear market is the opposite. 

Bear markets are defined by a 20% drop in a stock market index from the most recent high valuation. It is also usually coupled with a negative consumer outlook on investing and the economy.

And while bull markets usually have low unemployment and increasing corporate profits, bear markets may be marked by layoffs and decreasing company profits. 

With fewer investors and lower stock valuations, companies have less capital available and may resort to job cuts or borrowing to stay afloat.

How To Invest in a Bull Market

If you find yourself in a bull market, it’s important to understand what to do with your investments. 

Don’t time the market

While it may be tempting to look for signals of a bull market and adjust your investments accordingly, the data simply doesn’t support this strategy. 

Research shows that investors who attempt to time the market underperform a simple S&P 500 index fund. This mistake could cost you hundreds of thousands of dollars.

Source: QAIB Dalbar Study 2024

This holds true in any kind of market — bull or bear. The best approach is to continue investing in your chosen asset allocation and stay consistent. 

This will avoid emotional decisions that can severely hurt your long-term returns.

READ MORE: Active vs. Passive Investing: Which Is Best?

Rebalance your portfolio

A bull market may make certain investments in your portfolio rise, while others fail to keep up. That's why it's a good idea to rebalance your portfolio periodically to avoid holding too much of any one asset.

For example, if you prefer to hold 80% stocks and 20% bonds, a bull market may increase your stock holdings. 

If your asset allocations increase to, say, 90% stocks, it may be a good idea to sell some off and purchase bonds to rebalance back to a 80/20 asset allocation.

You can also rebalance by directing future contributions to the underweight asset in your portfolio, boosting your holdings without selling any assets (and avoiding potential taxes).

READ MORE: How To Build Your Core Portfolio

Dollar-cost average

When you’re in a bull market, you want to be invested in it. But if stock prices are high, it will cost you more to invest. 

To avoid this (and to maintain your steady pace), you can dollar-cost average your investments over time.

Dollar-cost averaging is the process of making set investments at regular intervals — every week or every month — regardless of whether the market is up or down. 

This allows you to “average” the purchase price of your investments, and participate in the growth of a bull market at a fair price.

What Not to Do During a Bull Market

As tempting as it is to try to beat the market, research suggests this may be a poor approach.

Here are a few things you should avoid doing in a bull market: 

Don’t invest in “hot stocks”

During any bull market, there are stocks that outperform the market. When things really start taking off, everyone and their mom will have a “hot stock tip” to share with you. 

For example, Nvidia is crushing it in 2024 — the stock more than doubled in the first half of the year. And while it may continue to rise, it can also drop in a hurry.

Betting on hot stocks can end in disaster, and putting any significant money into a single company comes with a very real risk of loss

So, when your barber starts giving you stock tips, it’s a signal to stay the course and just invest according to your predetermined plan (broad-based index funds are a good option).

READ MORE: How To Tell If an Investment Is Too Good To Be True

Don’t “sit on cash”

If a bull market has been underway for any length of time, some investors start to hoard cash in anticipation of a “pullback” in prices. 

But in many bull markets, that pullback never comes, and investors lose out on potential growth.

According to Hartford Funds research, if you sit on the sidelines and miss the 10 best-performing days in the market, your overall returns are cut in half! 

So don’t avoid the market and try to time the bottom. Simply stay the course and participate in market growth over time.

READ MORE: Long-Term vs. Short-Term Investment Strategies

FAQs

Is a bull market good or bad?

A bull market is considered a good thing. Bull markets are marked by economic and stock market growth, an increase in stock prices, increased corporate profits, and positive consumer sentiment. 

Bull markets are good markets that typically outlast bad markets, and they help maintain stock price growth over time. 

While some bull markets can become overvalued and crash, they are a necessary part of a healthy economy.

Should you buy or sell in a bull market?

No matter the market, it’s best to just stay the course with your investing plan. 

This usually involves investing regularly in tax-advantaged retirement accounts and other investment accounts. 

While it can be tempting to try to time the market and beat other investors, the market has proven that a simple investing strategy outperforms most of the time.

TL;DR: Investing in a Bull Market

A bull market is a sustained rise in the market, defined by a 20% rise from a previous market low price. 

While you may get lots of “hot stock” tips during a bull market, avoid putting all your money into the latest investment trend. While there’s nothing wrong with putting a bit of cash towards a hot bet, remember it’s still a gamble. 

Make sure your core portfolio remains strong and steady, regardless of what the market is doing.

For more investing insights, check out these episodes of the Erika Taught Me podcast:

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I'm an award-winning lawyer and personal finance expert featured in Inc. Magazine, CNBC, the Today Show, Business Insider and more. My mission is to make personal finance accessible for everyone. As the largest financial influencer in the world, I'm connected to a community of over 20 million followers across TikTok, Instagram, YouTube, Facebook and Twitter. I'm also the host of the podcast Erika Taught Me. You might recognize me from my viral tagline, "I read the fine print so you don't have to!"

I'm a graduate of Georgetown Law, where I founded the Georgetown Law Entrepreneurship Club, and the University of Notre Dame. I discovered my passion for personal finance after realizing I was drowning in over $200,000 of student debt and needed to take action-ultimately paying off my student loans in under 2 years. I then spent years as a corporate lawyer representing Fortune 500 companies, but I quit because I realized I wanted to have an impact; I wanted to help real people and teach them that you can create a financial future for yourself.

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Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.