Getting Ready for the Bull Rush

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

It's coming. Can't you feel the ground shaking?

OK, I can't either, at least not yet. But I know it's coming. It may be hard to see through all the doom and gloom in the business pages right now, but the next great bull market is out there, somewhere in our future. I don't know how far away it is, but it's getting closer every day -- and if it's anything like past bull markets, its arrival will be a surprise.

Are you ready for it?

Using the market's cycles to our advantage
I realize that it might seem strange to be talking about upcoming bull markets when the daily news reports on our current market seem so glum. But that's just the thing -- markets are cyclical. It's easy for me to predict a future bull market because history teaches us that it's inevitable.

History also teaches me something about what it'll look like. Past bull markets have started with sharp spikes upward, with small caps leading the way. Of course, bear markets see the occasional spike in the major indices too -- witness the bounce we saw during the third week of July -- which can make it hard to tell whether the train is really leaving the station or just revving its engines.

That's all the more reason to stay fully invested. If you're short of great stock investing ideas, or the bulk of your money is in a 401(k) with no direct stock investing option, it's completely fine to park your money in an index fund or an ETF. Just don't leave it in cash -- there's rarely a good reason for an investor who is more than 10 years from retirement to be holding anything but stocks in long-term accounts. If you're holding a cash position, I suggest you start dollar-cost averaging into stocks or an index fund now.

But don't just pick any index fund -- think in terms of asset allocation.

Covering all the bases
As the experts at the Fool's Rule Your Retirement newsletter often remind us, asset allocation is the key to sustained investing success over time and through different market conditions. And dividing assets among four basic categories of stocks has historically yielded higher returns than any of those categories alone. It's that cyclical effect again -- sometimes small-caps can pick you up when large-caps are down, and vice versa.

Here are the four bases you should have covered in your retirement stock portfolio. For each, I've shown some sample stocks -- all rated 5 stars by our CAPS community -- from each asset class and some index funds and ETFs you could consider instead:

Asset Class

Sample Stocks

An Index Fund and an ETF

Small-cap stocks

optionsXpress (Nasdaq: OXPS  ) , AmSurg (Nasdaq: AMSG  )

Vanguard Small Cap Index Fund, iShares Russell 2000 Index ETF

Large-cap stocks

3M (NYSE: MMM  ) , EMC (NYSE: EMC  )

Fidelity Spartan 500 Index Fund, iShares S&P 500 ETF

International stocks

France Telecom (NYSE: FTE  ) , Aluminum Corporation of China (NYSE: ACH  )

T. Rowe Price International Equity Index Fund, iShares MSCI EAFE Index ETF

REITs and real estate stocks

Ventas (NYSE: VTR  )

Vanguard REIT Index Fund, Dow Jones Wilshire REIT Index ETF

Remember, it's not just a matter of picking the strongest-looking asset class at any given time -- it's the way they work in combination over time that yields superior returns. Optimizing that combination is part of the art of portfolio management. It can be a complex subject, but if you'd like an easy-to-use guide to combining those asset classes into an optimized market-trouncing whole, check out the model portfolios in the July 2008 issue of Rule Your Retirement. (It's a paid service, but you can get full access free for 30 days, so click with confidence.)

Once you get your free access to the members-only area, follow the links to the July 2008 issue. There you'll find full instructions for pulling it all together -- and under the Resources tab, you'll see in-depth lists of recommended mutual funds for each asset class. These lists include funds available in most 401(k) plans, so you can put the plan into action no matter your situation. But whatever you decide to do, get rolling soon -- the bulls could be here any day!

To read more on asset allocation and preparing for the bull's return:

Fool contributor John Rosevear has no position in any of the stocks mentioned. France Telecom is a Motley Fool Income Investor selection. 3M is a Motley Fool Inside Value pick. optionsXpress Holdings is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.The Fool's disclosure policy has its red blankie all ready for the next running of the bulls.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 709875, ~/Articles/ArticleHandler.aspx, 10/22/2016 11:51:51 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:02 PM
ACH $9.29 Up +0.03 +0.32%
Aluminum Corporati… CAPS Rating: **
AMSG $65.49 Down -1.51 -2.25%
AmSurg CAPS Rating: *****
EMC $0.00 Down +0.00 +0.00%
EMC CAPS Rating: ****
MMM $169.50 Down -0.36 -0.21%
3M CAPS Rating: ****
ORAN $15.23 Down -0.02 -0.13%
Orange CAPS Rating: ****
OXPS.DL $12.60 Down +0.00 +0.00%
optionsXpress CAPS Rating: ****
VTR $68.36 Down -0.33 -0.48%
Ventas CAPS Rating: ****