Published Article Details

How should you invest in a bull market?

Posted by: Arti Bhargava on Aug 21, 2017, 10.04 AM IST

Prashant is a 30-year-old bachelor from a financially conservative, middle-class background. A finance professional, Prashant wants to build wealth. He has heard stories about investors who made a lot of money riding the bull market cycles over the past two decades. He wants to take the equity mutual fund route to riches. The funds have everything going for them—stupendous one-year returns, diversification, option to make small investments, professional expertise and a proven track record. He is focusing on two funds that have done spectacularly over the past year to invest his savings in. Should he invest more in a sector fund or in a new close-ended fund?

It would be a big mistake on Prashant's part to base his investment decision on a fund's one year track record in a soaring market. He must realise that wealth in equity is not generated in one or two years. There are market cycles. Bull markets and corrections go hand in hand. The top performers in a bull market are typically hit hard if they are not positioned right during a correction. The fund that performed spectacularly due to its large exposure to momentum sectors and stocks, may get hit the hardest when the market corrects. Therefore, Prashant must not select a fund based only on a single year's performance. He must look at how it has performed across different market environments. Besides its performance in a bull market, he has to check if it has done a good job in protecting downside losses in falling markets. A few sector funds that may have given fantastic returns during the recent market rally may also look attractive. However, they could be risky. Think technology funds in the late 1990s and real estate, infrastructure and commodity funds after 2007. To ride on their past momentum, fund houses may even launch new funds promising to invest in these focus sectors of the past. There are no shortcuts to building wealth. Prashant must choose diversified equity funds with a performance history. Any new funds must be avoided, because such funds may have been launched to gain from their past momentum, which may or may not be repeated in future.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.) This article appeared in Economic Times dated Aug 21, 2017, 10.04 AM IST

Online Courses

Capital Markets
Basic Level
BANKING AND CAPITAL MARKETS

Get the training you need to work in the Banking and Capital Markets industry through this intensive course

Capital Markets
Basic Level
SECURITIES AND OPERATIONS PREPARATORY

This NISM preparatory training is designed to help students whowant to take the securities and operation ex

Capital Markets
Basic Level
DEBT INSTRUMENTS - BASICS

Get a complete understanding of debt instruments in India. This course is ideal for professionals who want

Capital Markets
Basic Level
EQUITY MARKETS BASICS

More people in India are investing in equities and shares creating a need for more skilled equity managers

Capital Markets
Advance Level
EQUITY LINKED STRUCTURED PRODUCTS

Structured products are used to introduce tailor-made investment options in the world of finance. Our cours

Capital Markets
Advance Level
DEBT INDICATORS

What factors affect the debt market? Learn all about debt market indicators to understand the world o

Capital Markets
Advance Level
DEBT MARKET ANALYTICS

Need help to understand the bond market? This bond valuation course simplifies debt bonds, bond yield

Capital Markets
Intermediate Level
CREDIT RATING

Poor credit ratings indicate risky investment opportunities. Learn about the concept of credit rating, its

Capital Markets
Advance Level
EQUITY VALUATION PRINICIPLES

Learn the different principles of equity valuation along with their real world applications.

Capital Markets
Advance Level
EQUITY MARKET INDICATORS

Reinforce your stock market basics by learning about equity market indicators through our online course.

Capital Markets
Advance Level
DEBT MARKETS LEVEL - 2

Understand the structure of debt capital markets and the structure of its primary and secondary markets.

Capital Markets
Advance Level
EQUITY MARKETS -II

Learn advanced methods of fundamental and technical analyses of financial statements in capital markets.

Mutual Funds
Basic Level
MUTUAL FUND PRODUCT PRIMER

People in India are increasingly knowledgeable about the investment options available to them. Mutual Funds

Mutual Funds
Intermediate Level
MUTUAL FUND FACTSHEETS

Become a mutual fund investment advisor. This course will teach you the basics of mutual fund investment th

Mutual Funds
Basic Level
PREPARATORY COURSE FOR NISM MFD EXAM

This NISM modules preparation training is designed to help students who want to take the NISM examinations

Mutual Funds
Basic Level
MUTUAL FUND PROCESS PRIMER

Acquire the ability to provide complete financial solutions to investors using mutual funds through underst

Mutual Funds
Advance Level
PERFORMANCE EVALUATION OF EQUITY FUNDS

Learn to evaluate a portfolio thoroughly through our advanced level course on portfolio evaluation!

Mutual Funds
Intermediate Level
EQUITY FUNDS - PRODUCTS AND POSITIONING

Learn about the different types of equity funds and their positioning through ourintermediate level course.

Mutual Funds
Intermediate Level
DEBT FUNDS - PRODUCTS AND POSITIONING

Learn about the types of debt funds and their positioning through our intermediate level online course.

Mutual Funds
Advance Level
MUTUAL FUND PRODUCT POSITIONING

Learn how to choose and understand mutual funds products with our online course on mutual fund positioning.

Mutual Funds
Advance Level
DEBT FUNDS - RISK, RETURNS AND PERFORMANCE

Learn to market debt funds and how to calculate their risks and returns through our advance level course.

Mutual Funds
Advance Level
FUND SELECTION AND SUITABILITY

Learn to choose the right category mutual funds based on your clients' risk profile and financial needs.

Mutual Funds
Intermediate Level
LIQUID FUNDS AND TREASURY MANAGEMENT

Learn how to invest in liquid funds for treasury management through our advanced online course. Enrol now!<

Stock Broking
Intermediate Level
DERIVATIVE TRADING-2

Master the basics of option trading strategies and learn how to balance profits, risks and returns us

Stock Broking
Intermediate Level
EQUITY TRADING - 2

Delve into the nuances of equity trading strategies. Hone your skills to gain maximum rewards through this

Stock Broking
Basic Level
TRADING ACCOUNT - COMPLIANCE

Understand the consumer redressal procedures used by broking houses, their clearance and settlement process

Stock Broking
Basic Level
TRADING ACCOUNT - LEVELS - BASIC CONCEPTS

Get started with the basics! Learn how trading and DEMAT accounts are different along with their opening an

Stock Broking
Basic Level
DERIVATIVE TRADING

Get the tools and knowledge you need to understand derivative products. Learn about the pricing of differen

Stock Broking
Intermediate Level
MARGIN LENDING AND TRADING

Margin trading and lending is a high risk and return strategy. Learn how it works from our online course.

Stock Broking
Basic Level
DEMAT ACCOUNTS - PROCESS

Learn how to open and operate DEMAT accounts through our beginner level online course.

Stock Broking
Basic Level
EQUITY TRADING - 1

Learn the concepts of equity trading and trading strategies through our beginner level online course.

Stock Broking
Advance Level
DERIVATIVE STRATEGIES

Gain a thorough understanding of the best options trading strategies through our advanced online course.

Stock Broking
Intermediate Level
IPO AND MARGIN FUNDING

Understand the IPO funding process in India and their benefits to investors through our intermediate course

Stock Broking
Intermediate Level
LAS, IPO FUNDING & LEVERAGE

Learn about IPO, ESOP financing structures along with loans against securities through our online course.