Think the Bear Market Is Over? Here's How to Invest $5,000

One of the features of bear markets, in comparison to bull markets, is that the former tend to be shorter, lasting a little less than 10 months on average compared to the latter's 2.7 years. So given the length of the downturn we experienced last year, it's not unreasonable to think that the 2022 bear market is now over.

It's not such a bad idea to invest accordingly. For investors who have $5,000 handy that isn't earmarked for emergencies, let's go over one of the many possible combinations of equities you could buy with that cash to generate solid returns over the long run.

Start with a steady and diversified play 

Exchange-traded funds (ETFs) are a good place to begin investing in any market environment, including bull markets. An ETF is traded like stocks on some exchange and is a pool of companies designed to track the performance of an index or a category of equities. They allow investors to match the returns of the market (or some subset thereof) over long periods.

And one great ETF to invest in with a third of the initial capital of $5,000 -- or about $1667 -- is the Vanguard S&P 500 ETF (VOO -0.29%). As its name suggests, it attempts to match the performance of the S&P 500. Here's how well it has been able to do that over the past five years. 

Beating the market is difficult, but putting money in the Vanguard S&P 500 ETF efficiently generates the similarly impressive returns of the 500 well-established blue chip corporations included in the S&P 500. The efficiency of this strategy comes from the fact that it requires substantially less time than researching individual companies to invest in.

Furthermore, the Vanguard S&P 500 ETF has an extremely low expense ratio (the percentage of assets that goes to expenses) of just 0.03%. The ability to effortlessly keep up with one of the major market indexes is precisely why legendary investor Warren Buffett has consistently recommended that average investors put their money in funds like the Vanguard S&P 500 ETF.

Put your money to work with this dividend stock

Whether the market is going up or down, it helps to own shares of safe and stable companies that offer regular dividend payments. That's precisely what investors can get with Johnson & Johnson (JNJ 1.49%). This longtime healthcare leader is one of the most prominent pharmaceutical companies in the world, offering dozens of products in many different therapeutic areas, from neuroscience and oncology to immunology and infectious diseases.

The company also owns a medical devices segment with a lineup of products across four main areas: vision, orthopedics, surgery, and interventional solutions. Johnson & Johnson's entire portfolio is diversified, and the company routinely adds new products. The company plans to spin off its slower-growing consumer products, which should help the bottom line.

Johnson & Johnson's ability to innovate is an important asset for the company, one that has made it successful and should continue doing so. The drugmaker generally records consistent revenue and profits. It maintains a strong balance sheet -- as evidenced by its earning the coveted AAA rating from Standard & Poor's, the highest possible rating and a testament to Johnson & Johnson's creditworthiness.

Finally, Johnson & Johnson is on an incredible run of 60 consecutive annual dividend increases, which makes it a Dividend King and an ideal option for income-seeking investors. Taking another third of that initial $5,000 to invest in Johnson & Johnson seems like a great move if the recent market run extends (or even if it doesn't). 

Aim for high growth with this fintech specialist

It's also a good idea to opt for a growth stock when the market is in bull mode. In that department, fintech giant PayPal (PYPL -2.98%) is a solid option. PayPal is one of the leading digital wallets in the world. It ended 2022 with 435 million active accounts, an increase of 2% year over year. It is by far the most accepted digital wallet among the 1,500 largest online retailers in the U.S. and Europe, with 79% willing to take payment through it.

The next best, Apple Pay, is a distant second with a 28% acceptance rate among these retailers.

While PayPal's revenue growth has slowed recently, that is mainly attributable to macroeconomic factors such as inflation that has caused consumers to rein in their spending. Once conditions improve and consumers have more disposable income, spending will rebound, which PayPal will benefit from. The company will also continue adding active accounts and merchants.

From the customer side, PayPal's popularity and brand name are advantages. People tend to gravitate toward well-known companies that are industry leaders. And the more accounts PayPal adds, the more merchants will accept it as a payment method in a demonstration of the business's network effect (where the value of a service increases as more people use it).

PayPal's acceptance rate among the 1,500 largest online retailers in the U.S. and Europe rose by 3% year over year in 2022. There is a long runway for growth ahead for fintech as the digital payments revolution continues. Adding the remaining third of that initial $5,000 to PayPal will allow investors to profit from this long-term opportunity during the next bull market and beyond.