Index funds in a bull market

⚠️ Draft · pending your confirmation: Built on the “bull → ranging → bear” framework. Your core rule for a bull market is “in a bull, just keep investing” — keep buying and hold long-term, don’t fiddle with every wiggle. Rewritten below accordingly; please confirm the buy/sell numbers.

How should we invest in index funds during a bull market?

The logic of a bull market differs from both bear and ranging markets — a bear earns valuation mean-reversion, a ranging market earns swings, while a bull earns the positive feedback of trend and sentiment. Two mistakes to avoid: getting off too early and losing the position, or, caught up in the rally, going all-in with no discipline.

So the core of a bull-market strategy is just six words: in a bull, keep investing.

1. Buying strategy: keep investing, stay invested

In a bull market we do not “catch the bottom” — we keep investing once the trend is confirmed, and add on pullbacks. The core action is “buy”, not “wait”.

• (0) Base position: build it as soon as the trend confirms; don’t wait for “cheaper” — in a bull, waiting for a pullback often means buying higher.
• (1) Steady cadence: keep buying via DCA/batches; don’t stop out of fear just because it’s up.
• (2) Pullback to the 20-day line holds, volume dries up → add (one extra tranche).
• (3) Pullback to the 60-day line holds, still in the up-channel → add more (a bit more aggressive in a bull, but never beyond the planned cap).

In one line: a bull has no top call, but also no chasing the spike. Replace “call the top and go empty” with “keep investing + add on pullbacks” — capture the main upswing without going all-in at the peak.

2. Selling strategy: don’t get off easily, just one protection line

The worst of a bull is “sell a bit, run, then chase higher”. So the rule: hold still most of the time, with one loose drawdown line that triggers a trim.

• Drawdown from peak ≤ 20% → do nothing, keep holding (let profits run with the trend);
• Drawdown 20% ~ 25% → trim 1/3 (trend may be weakening, take some off the table);
• Drawdown > 25% or break of the 120-day line (year line) → cut to half or exit, move to watch mode for the next cycle.

Summary

The essence of index funds in a bull market: in a bull, keep investing — buy consistently and hold long-term, add on pullbacks that hold; use one loose “20% drawdown from peak” line as protection, no frequent trading, no early exit. Do “DCA + hold” all the way through, and let the trend make the money for you.

📚 Same series: ranging market → ch18 Index funds in a ranging market ｜ bear market → ch19 Index funds in a bear market.

⚠️ This article is a framework illustration only and does not constitute any investment or trading advice. Markets carry risk; decisions require caution.