Skip to main content

Stock Market Cycle: Design your perfect portfolio

What is stock market cycle?

Stock market cycles is generally a cyclic pattern that is related to the long term price changes in the stock market.These are closely related to the general business cycles.Every trader needs to know about the stock market cycles to predict the price behaviour of various stock while trading. These cycles form the basis of technical analysis that help to form trading strategies for various investments.

Learn to build a portfolio

A portfolio is a collection of investments owned by the investor.These may be cash and cash equivalents and tradable securities like stocks and bonds.Through a risk return pofile,an investor can develop an asset allocation strategy. Selecting from various asset classes and investment options, the investor can allocate assets in a way that achieves optimum diversification while targeting the expected returns. The investor can also assign percentages to various asset classes, including stocks, bonds, cash and alternative investments, based on an acceptable range of volatility for the portfolio. The asset allocation strategy is based on a snapshot of the investor’s current situation and goals, and is usually adjusted as life changes occur. For example, the closer an investor gets to his or her retirement target date, the more the allocation may change to reflect less tolerance for volatility and risk.

Choosing the best sectors to invest during various cycle stages.
As the stock market life is prone to changes in its economic life, this thus affects various sectors. An investor should be well acquainted with the trends prevailing in the market to wisely allocate his scare resources to various assets.
For this reason, investors can watch the Business cycle and choose sectors based upon historical trends within the different phases of the cycle:

  1. Early-Cycle Phase: The economy is rapidly recovering from recession. The credit begins to grow as monetary policy eases (interest rates are falling), which adds money and liquidity to a weakened economy. As a result, corporate earnings are growing and consumers are spending. Best sectors include consumer cyclicals and financials.
  2. Mid-Cycle Phase: This is typically the longest phase of the business cycle. The economy is stronger but growth is moderating. Interest rates are at their lowest and corporate earnings are at their strongest of the cycle. Best sectors include industrials, information technology, and basic materials.
  1. Late-Cycle Phase: Economic growth is slowing and begins to appear overheated as inflation climbs higher and stock prices begin to look expensive compared to earnings.Best sectors in this phase include energy, utilities, healthcare, and consumer staple.
  2. Recession Phase: Economic activity and corporate profits are declining and interest rates are climbing as the Federal Reserve works to fight off inflation. Best sectors in this phase include the same sectors the begin to gain favor in the Late-Cycle Phase. However, this phase is typically the shortest (usually less than a year) and moving into Early-Cycle Phase sectors can be considered.
  3. For more stock related advice,visit for website-http://wealthmaxsolution.com/
  4. Contact us-+91 9285292851



Comments

Post a Comment

Popular posts from this blog

Why You Need to Know The Rule of 15*15*15?

When the newbies enter the world of investing, one of the biggest questions that they may face is ‘how much’ and ‘how long’ should they invest? Enter the rule of 15*15*15. In this post, we are going to discuss what is the rule of 15*15*15 (and the rule of 15*15*30) and how it can help you to make your investment decisions. The rule of 15*15*15 The rule of 15*15*15 says that if you invest Rs 15,000 per month in an investment option which gives a return of 15% (CAGR), for a consistent period of 15 years, you will build a final corpus of Rs 1,00,00,000 (One crore). Here, SIP Amount = Rs 15k per month CAGR =15% Time horizon =15 Yrs Final corpus = Rs 1 Cr (Source:  SIP Calculator) Interestingly, your total invested amount is equal to just Rs 27 lakhs. However, over the time period of 15 years, you will build a total wealth of Rs 1 Crore. Rule of 15*15*30 The rule of 15*15*15 gets even better when we double the ‘time horizon’ keeping all the o...
2 comments
Read more

When is the best time to buy a stock?

It is quite difficult to find out the solution when an individual can start investment in the stock market i.e. what is the right time to invest in mutual fund or direct equity. We will try to tell here some conditions or aspects about stock market. Whenever share market touches high or witnesses a sharp correction from its high peak, novice investors get in a dilemma whether to start investment. When the market inches toward higher level or makes a lifetime high every week, new investors fear that market may collapse or go into sharp correction leading to loss for the investors. Again, when the stock market witnesses sharp correction or enters in the bear market, investors do not consider it is the right time for investment. They think that market may continue its correction, so it is not the time for investment. They think that the share prices may further downside more. So, these are the conditions which take place continuously in the stock market and people remain confused whe...
Post a Comment
Read more

Why is investing important?

Money is a mandatory part of every person's life, it plays an important role in life and creating wealth for future. Some people have lots of money, but they don't know how to manage it successfully. Investing is very much important to secure future life. To build wealth, a person has to invest money. If a person doesn't invest, he is just missing out on opportunities to increase his money. Obviously, there are chances to lose money in investments, but if the investment is done by the trader wisely, then he can gain huge money. Many people take suggestions from  stock tips  providers regarding right investment in the right platform. Following are the benefits of financial investment: 1. Increase/grow money - Investing can allow you to grow money fastly. Most investment platforms such as stocks, bonds and mutual funds offer good returns on investment over the long term. This return builds and creating your wealth over time. The growth of money is also important to fu...
Post a Comment
Read more