Just as the seasons of the year keep changing from winter, summer, spring, and autumn, the investment opportunities also change depending on different seasons of life. Every investor should understand this phenomenon since it prepares them for every season and allows them to make informed investment decisions. Investors will note that there will be periods of pessimism or distress and periods of increased optimism.
Most investors tend to concentrate too much on the current season in the stock market while forgetting that a new season might creep in unnoticed. However, to better understand the stock market, individuals should begin investing early in life to gain the most out of every season. Some of the characteristics associated with every investment cycle include:
- Spring: During this season, most investors are often under pressure because of economic recession, and unemployment is beginning to lessen. This season will sometimes pass unnoticed because the stock market will not report it. Investors should take advantage of the spring season because the share prices are often suppressed, and the blue-chip companies often sell at very steep discounts. At the end of this season, investors will begin to note an increase in recovery earnings followed by increased share prices.
- Winter: This period comes with great stress because of increased company bankruptcies and high volatility. Most investors will suffer from financial panic and will often feel like it’s the end of the world. However, this should not be the case because the winter season will eventually fade. Although the media will give negative reports and studies about how bad the stocks are fairing, investors should take advantage of this period to purchase stocks. Investors should always understand that it is darkest before dawn, and better times will eventually come up.
- Summer: This is one of the favorite seasons for every investor. The media will be actively talking about how profitable it is for those investing in stocks. Stocks such as blue chips will perform quite remarkably during this season, while other industries such as biotech will crop up. However, in the summer season, stocks take so long to go up, unlike the winter season.
- Fall: This is one of the most challenging seasons to time in the stock markets. In this period, investors will witness different mergers and acquisitions and IPOs, and company founders will begin to cash in their investments before time runs out. Investors should avoid overpaying for stocks, and they should be careful in the areas that they invest. The fall season is also the most challenging period to invest in, and individuals should settle on purchasing discounted stocks.