The movement of the financial markets can seem mysterious. But in looking back, we can see patterns that consistently repeat themselves. As an investor, how should you respond to these market cycles?
It’s useful to know that market cycles are connected to business cycles — the overall movement of the economy. In fact, a market cycle frequently anticipates the business cycle, so stock prices may rise or fall several months before the economy reaches high or low points.
When you invest, though, it may not be a good idea to try to time the market, making buy or sell decisions based on where you think the market cycle is at any given time. Such a strategy could lead to mistakes, such as selling quality investments to avoid losses. Instead, try to stick to a long-term strategy that’s based on your goals, risk tolerance, time horizon and need for liquidity. And try to diversify your portfolio among a range of investments. While diversification can’t prevent all losses, it can help reduce the impact of market volatility.
Rather than getting stuck in a cycle, follow your own path toward achieving your most important financial objectives.
This content was provided by Edward Jones for use by Bryan Farrell, your Edward Jones financial advisor at 10930 S. Western Ave., Chicago. Bryan can be reached at (872) 273-6177.
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