

Q: What are some signs that a bull market is coming to an end?

A: Bull markets can be pretty unpredictable. By the time most people realize there's a bull market raging and jump in, the market's uptrend may be about to fade out.

The same goes for the end of moves higher by the stock market. Investors explain away the first few bad weeks and months of trading. And before long, these late investors are looking at some big losses.

Properly timing bull markets, getting in at the start and getting out at the end, is clearly highly profitable. The average bull market since 1929 has risen 81%, based on data from Stock Trader's Almanac. Meanwhile, the average bear market has lost 30%, which would take a big chunk out of the bull market's gains.

Given just how profitable bull markets can be, investors spend an inordinate amount of time trying to find ways to know the end of a bull market is near.

Market timers have all sorts of ways to try to pinpoint the end of a bull market. Some look at technical factors of the stock market. A popular technical indicator that's been somewhat telling has been the 200-day moving average. Some investors think when stocks fall below the 200-day moving average, that's a good time to get out and avoid further downside.

Other investors choose to focus on fundamentals and valuations. These investors figure when the price-to-earnings ratio gets higher than average, that's a sign investors might be overpaying for stocks. The average P-E of stocks since 1988 has been more than 18 on a trailing basis, so when stocks get above that, some think the bull is getting tired.

But while it would be very profitable to be able to predict bull and bear cycles, the track record of people trying to do it successfully and routinely isn't so good. Most investors who try to time the market get into bull markets too late and bail out too early. And that's why studies have shown that staying invested with a properly diversified portfolio is actually a better strategy than trying to time the market.