The next up cycle in the stock market
Everyone knows that the stock market works in cycles, both short and long, with the short cycles forming a part of the long cycles. A long cycle is generally regarded as over the course of a year. The 2018 calendar year cycle is a case in point. With the ASX 200 starting near 6,050 points, it has risen and fallen three times, with the most recent rise and fall the most dramatic. The ASX 200 is approximately 400 points lower at the moment than where it started at the beginning of the year, leading to a lot of wringing of the hands. However, if you had traded your stocks during the year you could have made significant profits in the price movements.
Stock market investing success in a volatile market (which means price variations) relies on understanding when the cycles will start and finish and more particularly when it will begin to fall and rise. Traditionally Investors have relied on analysts working out with hindsight what event caused the downfall in a market and they then make an assumption that when the event passes, the market will rise. Occasionally this works, however, it never catches the fall, just sometimes the rise.
All this leads people to be fearful of stock market cycles, wishing for long upward cycles to be the norm. They are not. If you are an active investor there are going to be many cycles per year. It is no use being upset when a stock is at the bottom of a cycle, because you have lost money from when it was at its high point. You have only ‘lost money’ at a point in time. The cycle will reverse and head upwards.
An investor needs a state of mind to check performance annually, not within the highs and lows of each cycle. Otherwise put your money into the bank so as to minimise risk, which in turn will minimise return.
The unanswered question in this is how to get the return without the great risk. Although Institutions continue to use analysts, they have not been the answer through history and doing the same will not make them the answer now. Pythagoras does not rely on post fact interpretation of events, it relies on measuring the volatility of the market which in turn allows events to be predicted as to when they will start and finish. This is done mathematically. It is the best of both worlds, reduced risk and higher return.
The stock market is pleasure and pain. Our method is different and aims to reduce the pain of short term cycles so as to allow the greater pleasure of a greater annual return.
Currently the question on every investors mind is when the cycle will turn upwards again. It is about to turn and we expect the upward turn to be followed by a small correction, which in turn will be followed by a stronger upward period in the cycle.
Michael Dee, 0419 726223
Disclaimer: The information in this document (“Information”) is not intended to constitute advice. It is for general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and seek professional financial advice before relying on or making investment decisions based on the Information. Investment products are subject to risk including the loss of income or capital invested. Past performance is not an indicator of future performance. Neither Pythagoras Investment Timing Index Pty Ltd ACN 147371113 (AFSL 431 238), its directors, employees and representatives (collectively, “Pythagoras”) warrant the accuracy or completeness of the Information. To the extent permitted by law, Pythagoras disclaims all responsibility and liability for any loss or damage of any nature whatsoever which may be suffered by any person directly or indirectly.