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Investment Cycles

Just like the weather, financial markets have a cyclical nature. Failure to recognize this pattern can result in financial peril; the goal should be to structure investments that are well positioned to perform across market cycles.

There are several types of cycles evident in investing. Of the two major investment styles, many people are saying that growth may outpace value over the next few years. Small and midsize-company stocks have performed well and may now give way to large-company stocks. Interest rates go up and down. Real estate investing goes in and out of favor. In short, there are "bull" and "bear" markets-they appear to move in cycles-but their length and magnitude are unpredictable.

Financial planners have been giving advice for many years on how to deal with uncertain markets. Diversify. Consider rebalancing. Look at asset classes that have been out of favor for a time. Learn about investments that have low correlation (behave differently) for a given set of market conditions. Know what you own and stay informed.

Market Cycles and the Bible

One of the most well known verses in the Bible supports this idea of "seasons" or cycles:

"To everything there is a season, a time for every purpose under heaven: a time to plant, and a time to pluck what is planted; a time to break down, and a time to build up; a time to gain, and a time to lose; a time to keep, and a time to throw away.” (Ecclesiastes 3:1-3,6 NKJV)

Furthermore, God blessed a man named Joseph and the entire nation of Egypt because Joseph recognized that any economy would have periods of growth and recession. Joseph advised Pharaoh to put away a portion of the crops during the good times to help people survive the bad times. Scripture encourages us to put away some of our increase into a "storehouse" in case we need it in the future. A storehouse is appropriate for families, businesses, and ministries.

The views are those of Bruce Olmstead and not those of Summit Brokerage Services. Investments in securities do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested.  No system or financial planning strategy can guarantee future results