This is why you need to understand cycles, booms, and bustsSep 14, 2019
Although great attempts have been made to smooth out the business cycle, the cycles always prevail.
Indeed, cycles are forever prevalent, and not only in markets: there are four seasons, we have our own life cycle…even planets have a life cycle.
And for investors, it’s vital to remember that an understanding of market cycles is the key to maximising returns.
Market cycles work through the accumulation, mark-up, distribution, and mark-down phases…and are mirrored by the emotions of investors.
Value investors and smart money managers look to load up on discounted assets in the accumulation phase, when sentiment and media reporting is at its lowest ebb – in effect, looking to buy a dollar for fifty cents – in accordance with capital growth theory.
Of course, the real world is messy, and you can never pick the exact bottom of the market.
But the nice thing is, you don’t need to invest your money all in one go, and you’ll get near enough the bottom to generate outperforming returns.
So, remember, the smart money is contrarian, and buys during the accumulation phase, rather than at the climax of the buying cycle.
Markets and economies will continue to cycle, as I discussed further in the short video here
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- Work with me privately
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