Business cycle investing
How to use business cycle based investment approach?
Business cycle investing is a strategy that aims to capitalize on opportunities arising from different phases of the economic cycle. This approach involves adjusting investment strategies according to the fluctuations in economic activity, which typically occur over months or years.
Key aspects of business cycle investing include:
Identifying economic phases: Fund managers analyze macroeconomic factors and consumer behavior to determine the current phase of the business cycle.
Sector allocation: Investments are made in sectors expected to outperform during specific economic phases. For example, consumer discretionary and industrials tend to outperform in the early cycle phase.
Dynamic portfolio management: The strategy is top-down and market cap agnostic, with portfolios adjusted based on changing economic conditions.
Diversification: Business cycle funds are typically diversified across various sectors, helping to mitigate risks associated with single-sector performance.
Professional manag…