What must I know about business cycles when investing?

Hi!

Answered a similar question here: https://seedly.sg/questions/what-do-we-need-to-... so do check it out if you want to find out more.

To illustrate further, here's a diagram to help you understand better!

These are the industries that you can potentially look at, before deciding which stocks to buy (at different stages of the business cycle).

Hope that helps!

I think one important thing to look at is how the financial metrics differ across different stages.

For example, negative profitability and cashflows might be expected for companies in its Launch stage, as shown by the image, because the company hasn't reach its break even point, and has high marketing and capital expenditures relative ot its sales. Whatever cashflow is reaped is also ploughed back into the business for growth.

For a company in its mature stage, negative profitability and cashflows might be bad signs since it could signify that the company is slowly dying out and is not able to adapt to changing market trends.