Sunday 15 April 2012

If you are investing for long term, try to avoid cyclical stocks. But, it is ok to trade these stocks.


Acknowledge its Industry Nature

Companies have its own business cycle. This especially true to cyclical stocks. Businesses like housing properties, airlines or automobiles are more susceptible to the overall economy.
When the economy is riding the bull market, customers tend to spend more on luxuries thingy like cars, housing and holidays to overseas. But when economy experience slight downturn, people are more likely to avoid spending on the luxury things. 


Just imagine, when more employees been laid off and higher cost of living (as effect of inflationary pressures), buying new homes or brand new cars are most probably the last things in their mind. Struggling their lives through the turbulence time thought them how important cash saving is. If you are investing for long term, try to avoid this type of stock. But, it is ok to trade these stocks.

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