There is a very different bull market on hand

The bear market has done its job. He removed the excess upside, and revalued the stock in line with reality. Like previous major sell-offs, these resets were driven by fundamental and expected changes. And therefore…

Don’t expect the next bull market to be the same as the last bull market

Times, circumstances and situations change. However, most investors and many investment professionals will be slow to let go of the past. Their comfort in staying with what they know will hinder their adaptation until they are convinced of a newer and better approach. This naturally means that they will need to see the evidence: superior performance and broad popularity.

The pattern will be familiar:

  • Amidst the negativity and intense doubts, some stocks start to rise
  • The stock market stops falling and basically forms as negativity recedes and returns buy
  • The stock market begins to rise, which results in satisfaction and a desire to look forward
  • The rise of the stock market becomes apparent, which increases investor interest and even results in a limited upside
  • The new bull market is mostly accepted, and now comes the realization that some parts of the stock market have far outperformed other, more popular areas

So today’s strategy is clear:

Start targeting new stock ideas that could be the best performers. Know that they will be different and the rationale behind them: new, exciting, and fun.

How does it differ?

very. What will appear are vastly different “topics” which will include the winning stocks. Most importantly, it will bear no resemblance to previous familiar subjects.

Why is there always such a dramatic shift? Human nature:

  • In a bull market, topics appear as describing both the rationale and the winning strategy
  • At its height, topics became the ultimate approach to stock investing
  • At the height of their popularity, themes produce sky-high ratings and return of expectations
  • These top ratings fall back when some concerns are first noticed
  • When fears begin to soften expectations, the slippage becomes slippage, which most likely indicates the formation of a bear market
  • As fears become more widespread and confirmed, a bear market occurs, ending with a flood of negativity that undermines and discredits bull market ideas and beliefs.

Key question: How do you invest in the following bull market topics?

We realize that the new bull market was not predicted in some of the magic chart books on Wall Street. It will evolve along with conditions, procedures and developments. So, the answer is a wagon ride on Wall Street. This means…

Invest using active managers, in pursuit of increased capital. Diversification between value, growth and selective management methods. Also, vary the sizes of the companies (better yet, look for funds that are not restricted by size). Avoid big funds – they are too impractical to make transitions in time, plus they tend to get close to the stock market’s total allocation to keep its performance in line.

Example: My Money Options

I believe that winning in the upcoming bull market will require in-depth, sound research backed by experienced portfolio managers. Therefore, I chose the following four stock funds (three at Vanguard and one at Fidelity).

The three Vanguard funds are managed by independent investment management firms selected by Vanguard investment professionals. This multi-management style has been practiced by large institutional funds and has been the foundation of my career. It allows to pursue superior performance from specialized managers while controlling overall risk through diversification of different management styles.

Here are the three Vanguard funds and the number of investment firms selected to manage each of them (each linked to the Vanguard Fund page):

  1. Vanguard Windsor Fund (Value Fund): two investment management companies
  2. Vanguard Growth and Income Fund (Growth and Value Combination): Three Investment Management Firms
  3. Vanguard Explorer Box (Specialized Growth Fund): Five investment management companies

The Fidelity Fund is managed solely by Fidelity, which has a history of successfully identifying new growth topics. This box focuses on top picks and the smaller size of the box allows it to be versatile.

stocks focused on fidelity (Specialized Growth Fund):

  • Holdings: 40 companies
  • Fund size: $3.2 billion
  • “Active stake” (scale is 0% for an index fund to 100% for a full divergence of the S&P 500): 66%

Bottom line: Be positive, think differently, and act now

The main challenge for investing is to deal with a new, alternative world unlike any before. With the tectonic shift, like the current one, investors’ beliefs about the last set of “basic facts” have receded. In their place are the uncertainties that seem to indicate the need for caution.

However, we should welcome the new focus on risks amid a hazy outlook. This mindset keeps valuations in check and, in turn, makes potential returns more attractive.

So, be glad that this is the beginning of something new and everyone is experiencing the same unknowns. Currently, All We need to invest in a way that allows us to catch the new excitement coming before it becomes popular.

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