When I think about investing and my personal portfolio, several things come to mind, such as my long term objectives, risk tolerance, and so forth. One thing that usually receives little consideration by most people is the business/economic cycle and where we are in it. A full business cycle, for example runs peak to peak or trough to trough. So starting at the height of economic happiness, coming down through a recession and back up to the height would be a full cycle.
This is worth paying attention to because do you really want to shift most of your retirement dollars into aggressive growth stocks or buy that really expensive house four years into a bull market when the average business cycle is about six years, peak to peak and about 4 1/2 of those years are good years according to the National Bureau of Economic Research (NBER)?
Consider this, if the average person starts saving for retirement at age 25 and lives to 85 then that person most likely lives through 10 business cycles (for investment purposes). By simply increasing the amount we invest through the trough and periods of contraction (the bad times) we end up following the so called smart money.
Warren Buffett said it himself, "Buy when there's blood in the streets." Put another way, when everyone else is running for cover, I like to go outside and see what's been left behind.
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Please consult your financial advisors prior to making financial decisions. Michael Marshall is a Financial Advisor with Waddell & Reed, Inc., and is securities licensed in CA. Michael can be reached at email@example.com. Waddell & Reed, Inc. Member FINRA and SIPC