The Article Daily

There are cycles throughout life. However, the ability to foresee an oncoming stock market cycle is a talent some never acquire. Most often, investors fail to realize when things are going really well in a Bull market, it is destined to change. And, even those who recognize that there are stock market cycles; find it nearly impossible to determine what will be the top, and when the bottom will fall out. Diversification of portfolios is always the recommended strategy.

Different kinds of investments should be included, such as technology, health care, energy, and yes, include some bonds. Most people don’t think too highly of bonds, but it is a safe haven when the bottom starts to drop out of the stock market.

When beginning a stock portfolio, choosing five or ten really good, solid companies, especially those that are well managed, should perform very well for the investor. It’s not wise, however, to hold onto the “big winners” forever. It is a good policy to sell a couple while they are still high in value, since an unexpected cyclical market change could cost a great deal if the stock declines rapidly. However, be prepared to pay capital gains taxes on the profits from the stocks you sell.

Pick up some Values and Watch the Turnaround

When the bear market is at its worst, some investors become disgusted and are petrified at what their losses will be. Their emotional trauma is understood, since nothing in the media is good news and mostly predictions of “the worst is not over”. Their decision to get completely out of the stock market, retrieving whatever capital they have left, however, is a bad idea.

The savvy investor and the experienced traders, as well as those who are just greedy, take this opportunity to accumulate some pretty valuable stocks with potential to soar upward again when market confidence improves. Sometimes, speculation pays off when looking at how a particular company’s financial strategy may be improving, for example, through changing management. Gradually, a slight upturn is noticed in the trading which may encourage others to “get on the bandwagon” and begin investing again.

After a short time the gradual rise in the market slows down and other investors take this opportunity to pick up some values in the market while prices are still reasonable. The bear market begins to take on a bullish attitude, based on the upward mobility and the media starts reporting a “light at the end of the tunnel” and predicting that the worst has passed.

Keep stock market cycles in your upper mind as you trade. Now, those who have taken advantage of the lower stock market prices and loaded up are deciding to sell and take their profits. This is known as the Distribution Phase, and can last from a week or two to several months. Then the more painful falling prices of stock returns, in the markdown stage. And it starts all over again. The time is right for the astute investor to pick up some great values in the Bargain Basement Sale.

Caterina Christakos is a private investor and published author. To get more information go to: http://financialinvestmentsdirectory.com