What’s a bull market, and what does it mean for your retirement savings?

What’s a bull market?

A bull market is generally defined as when the value of the stock market has increased at least 20% over its previous low point. The opposite is a bear market, which is when the value of the stock market falls by at least 20% from its previous high point. Bull markets often happen after a recession, as the economy recovers and investor sentiment improves.

You’ll find that people tend to be happy about a bull market and unhappy about a bear market. But how you feel about the market shouldn’t guide your investment decisions. If feelings of euphoria cause you to buy stocks in a bull market, you may end up overpaying—just as selling stocks out of stress in a bear market could lock in potential financial losses. Investment decisions should be grounded in an understanding of the market and the investments themselves, and be guided by an appropriate investment strategy.

Think about time before investing in a bull or a bear market

Rather than acting on your emotions, think about how much time you have until you need access to your cash. Investing for the long term can usually handle riskier investments than investing for the short term.

What’s short-term investing?

If you’re saving for a goal that’s less than three years away—such as a new car—you’ll want to consider a short-term investment strategy. You want to be fairly certain that your money will at least have the same value when you need it that it has today. Even if you’re in a bull market today, will it still be a bull market when you sell your investments?

General guidance for short-term financial goals is to consider a more conservative investment strategy, which may include:

• CDs
• Money market accounts
• High-yield saving accounts
• Government bonds
• Treasury bills

What’s long-term investing?

If you’re saving for a goal that’s more than three years away—such as retirement—you may be able to accept more risk in your investment strategy. When you have more time until you need your money, you have more time to ride the bulls and the bears, with the potential of greater growth. You may want to consider mixing up your investment strategy with some funds that have medium risk and potential reward and some with a higher risk/reward profile. And then as you get closer to your goal, you may want to consider changing to a more conservative investment strategy to lower your risk. 

A long-term investment strategy may include:

• Employer-sponsored retirement plans
• Stocks
• Roth IRA
• Real estate

Consider time and ignore the bulls and bears

Of course, not all investments gain 20% in value during a bull market, just as not all investments lose 20% in a bear market. And even the professionals who choose stocks for a living can’t beat the market all the time. Whether you’re in a bull or a bear market, a suitable strategy is one grounded in an understanding of how the market works and your own financial goals. And if you don’t feel comfortable making those decisions on your own, an experienced financial professional can help guide you so that your savings isn’t likely to be derailed by either the bulls or the bears.

For complete information about a particular investment option, please read the fund prospectus. You should carefully consider the objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the investment option and investment  company.  Please read the prospectus carefully before you invest or send money. Prospectus may only be available in English.