Analysis of Returns and Risk Control for Offense-Defense Balance Strategies During Bull-Bear Transition Phases

The bull-bear transition phase is one of the most challenging periods in the investment cycle. Analysis shows that the core factor determining investment results during this phase is not precise judgment of market direction, but the offense-defense balance of the strategy [1][2][3]. An overly conservative strategy may miss gains in structural bull market trends, while an overly aggressive one may lead investors to exit early at bear market lows due to unbearable losses, failing to wait for the return of the bull market [1][2][3]. Meanwhile, the real risk in a bull market does not come from declines, but from investors’ blind confidence due to emotional expansion during the rise, which then leads to the loss of the margin of safety and ultimately results in losses [1][2][3].

Diversified allocation and rebalancing are important means to achieve offense-defense balance. The essence of diversified allocation is not to pursue higher returns, but to reduce volatility to a tolerable range through scattered investments, thereby navigating the bull-bear cycle with a more stable process [3]. Rebalancing uses rules (such as regular, quantitative, or market temperature-based rebalancing) to counter emotional interference in investing and reduce the impact of subjective judgments [3].

1. Strategy Priority During Bull-Bear Transition Phases
   : The core of the offense-defense balance strategy is to maintain flexibility during cycle transitions—neither overexposing to bear market risks nor ignoring bull market gain opportunities. The effectiveness of this strategy has been verified by multiple market analyses [1][2][3].
2. Dynamic Management of Margin of Safety
   : In a bull market, investors tend to lower margin of safety requirements due to optimistic market sentiment, so more vigilance against risks is needed. A bear market is an opportunity to rebuild the margin of safety; one should not abandon long-term positioning due to short-term fluctuations.
3. Value of Rule-Based Investing
   : Rebalancing and diversified allocation constrain investment behavior through rules, avoiding decision-making mistakes driven by emotions. This is crucial for the stability of long-term investment results [3].

• Risk points
  : During bull-bear transition phases, investors tend to fall into the trap of directional judgment or make extreme decisions due to emotional fluctuations; losing the margin of safety in a bull market may lead to significant losses in subsequent bear markets; diversified allocation may underperform a single asset in phased market trends.
• Opportunity window
  : The offense-defense balance strategy provides investors with a path to navigate cycles, allowing them to capture market opportunities while controlling risks; rule-based rebalancing operations can achieve buy-low-sell-high when there are market mismatches.

The offense-defense balance strategy during bull-bear transition phases is a core means to control risks and pursue long-term stable returns. Investors need to avoid extreme investment behaviors, maintain a margin of safety in bull markets, and build resilient portfolios through diversified allocation and rebalancing. These strategies emphasize countering emotions through rules, navigating the bull-bear cycle with a more stable process, and providing protection for long-term investments.