Bull markets are fun things. They make you rich, beyond expectations. If there is one cardinal sin, though, in a roaring bull market, it is that of trying to fight the ticker. Sometimes money is made, and more often lost, in trying to do that. It is one thing to step aside when unsure, quite another to try and fight a wave, as short sellers have repeatedly found out in the last many months.
The thing to do in a bull market is to spot the right baskets to be in and then not ask questions. Intelligent analysis and rational thought are always useful companions in any market, but once you have gotten into the right stock, give it a wide berth. More often than not the stock will climb to valuation levels that will look absurd to you. Never mind, pat yourself on the back, take credit for it and do not even think of fighting the trend. Take the power sector, for example. Would even the biggest power bull have dreamt of such stock prices a year back? Impossible. One look at the Excel sheets will tell you that maybe prices are ahead of fundamentals, yet who are we to question the wisdom of the market? Let it ride. Ride it till it gets too heady for you and check out with your money. Enjoy the profits, do not regret if you left the party a bit too soon, it does not matter.
There will be times when stocks you do not own will go up vertically. You will explore and find there is no justifiable reason for such moves. Never mind, it is a bull market, strange things happen here. Here too, do not make the mistake of fighting the tape. Do not short what you do not understand. Respectfully step aside if you do not have the heart to participate, you may not make money from the trade but you will not lose either. Bull markets are also fairly blunt creatures. One close look and you will figure out where the action is. Try and identify what attracts you most within this "hot" universe. Do not spend too much effort in identifying contrarian trades. Things that do not move. You will pick the odd winner but, generally, the experience will be akin to banging your head against a wall. Within the hot sectors try and build in as much margin of safety as you can. Pick the best stocks even if gains are somewhat muted compared with the small caps there. As individuals, the idea is to make money, lose little, never to be first in class. We are hardly fund managers, only ordinary folks getting lucky from a bull run.