If you invest the goal is to have more and the easiest and hardest way is to buy low, hold on to your investments for a period of time, sell some of it when it is high and buy more when it is low. That is a cycle. The way a cycle works is when you look backwards, it is easy to see. When you look forward it is very hard to know what and when the top or bottom is. One person who has tried to use cycles as an investment philosophy is Howard Marks, the founder of Oaktree Capital Management. Mr. Marks has written a number of books and every once in a while, he publishes his thoughts on Oaktree Capital Management website. Mr. Marks has made money buying low and selling high and wrote a book called Mastering the Market Cycle, published by Houghton Mifflin Harcourt Publishing Co, NY, 2018.

From a practical point of view, the timing is very hard because we all hear stories or read stories about someone making a lot of money in the up cycle or when markets are going up and we want to ensure we get a piece of the rising prices. When prices go down, you need both cash or cash equivalents to buy low and wait till prices go up. To do that you need to have to be doing your homework on why a stock price has sold off too much and under normal circumstances will go back to the normal.

Both Ray Dalio of Bridgewater Associates and Mr. Marks believes in cycles. Mr. Dalio has done You Tube videos of cycles. Mr. Marks writes books. The books will help you determine how to manage the cycles.

The cycles can be as simple as following the weather patterns. More people go to the beach and enjoy the sun in summer than in winter. In the colder months, the sun shines, the beach is open but the weather is cold and there are very different aspects of the snow and how animals adapt to the cold. The weather plays a part in the construction field or if there is more work during the spring, summer and fall, this means stock prices should be higher. The time to buy is in the winter when the natural cycle means less revenue and lower stock price, but an anticipated stock price rising when the weather warms up.

The cycles Mr. Marks refers to is economic cycle relating to the markets which tend not to be tied to the weather.

Most people that invest will do a combination of 3 things

trying to know more than others about what Mr. Marks calls the “knowable” the fundamentals of industries, companies and securities.

being disciplined as to the appropriate price to pay for a participation in those fundamentals

understanding the investment environment, we are in and deciding how to strategically position our portfolios in it.

The first 2 are recognized by security analysis and value investing.

The third is calibrating your portfolio’s position in terms of risk between defensive and aggressive stocks.

Mr. Marks is speaking to a portfolio of stocks and what risk you should you have to both not to lose money and at the end of the year to be worth more than you are today.

Part of the answer, as Mr. Marks see it is understanding where you are in the investing cycle.

Linking to dividend paying stocks, there are many adages of how to invest and over time you will hear many of them. The simplest is to invest in profitable companies which pay dividends and over time the combination of the quarterly dividends and the stock trading at higher multiples due to making profits will help you be more wealthy than when you started. The great thing about dividends is you determine what you want to do with the money – reinvest it, expand your portfolio, use it to enhance your lifestyle, it is good to have choices.

There are more questions than answers, till the next time – to raising questions.