How to profit from economic cycles

(Since April is Financial Literacy Month, a number of articles will be devoted to more educational topics. This is Part IV in a four-part series about how understanding economic cycles could inform your financial decisions. Part I is Understanding economic cycles: An introduction. Part II is Recognizing economic seasons: recovery and growth. Part III is The fall and winter seasons of the economic cycle.)

In the first three parts of this series, you saw how the economy moves in cycles of seven to 10 years, and how each cycle can be broken down into four phases which correspond closely to the seasons of nature. We also looked at some of the telltale signs of economic activity that can help us recognize where we are in the cycle.

You may be thinking, "That's all interesting, but how can I apply that knowledge to my personal financial life?" Let's start by decapitating the elephant in the room -- market-timing. Market-timing is a fool's game. However, most of the time market-timing refers to trying to find the high point in the market to sell high. It is true: Nobody is able to tell when a market has reached its peak.

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The fall and winter seasons of the economic cycle

(This is Part III in a four-part series about how understanding economic cycles could inform your financial decisions. Part I is Understanding economic cycles: An introduction. Part II is Recognizing economic seasons: recovery and growth. Part IV is How to profit from economic cycles.)
You will recall from Part II of this short series about economic seasons that the spring of early recovery and the summer growth season resemble the corresponding seasons in nature fairly closely. In this post, we will look at the other two seasons of the economy: fall and winter.

But before we do, it is important to keep in mind that, though the seasons in nature change every three months, the seasons of an economic cycle do not have a fixed length. In terms of economic cycles, a season can last years; and it is difficult to set a calendar to know when the season changes.

As in nature, we have two change seasons (spring and fall) and two main seasons (summer and winter). Last time we looked at one of each. Here are the other two.

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Recognizing economic seasons: Recovery and growth

(Since April is Financial Literacy Month, a number of articles will be devoted to more educational topics. This is Part II in a four-part series about how understanding economic cycles could inform your financial decisions. Part I is Understanding economic cycles: An introduction. Part III is The fall and winter seasons of the economic cycle. Part IV is How to profit from economic cycles.)

In Part I of this series, the introductory post about economic cycles, we discussed the fact that the economy, while growing over the long term, moves in up-and-down cycles and that each cycle can be broken down into four phases that mirror the four seasons of nature. In this section, we will explore what we identified as the spring and summer seasons of the economic cycle by considering two fictional crop farmers (Farmer Fred and Farmer Claude) whose livelihoods depend on how well they manage their work each season.

Farmer Fred is a successful farmer; but his neighbor, Claude, less so. (We'll just call him Farmer Clod.) But let's dive into the seasons and see what each does that causes them to be successful or not. Nature programs always begin with the newness of spring, so why don't we start there?

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More about...Economics, Planning, Side Hustles

Understanding economic cycles: An introduction

(Since April is Financial Literacy Month, a number of articles will be devoted to more educational topics. This is Part I in a four-part series about how understanding economic cycles could inform your financial decisions. Part II is Recognizing economic seasons: recovery and growth. Part III is The fall and winter seasons of the economic cycle. Part IV is How to profit from economic cycles.)

Getting rich slowly is built on these four commonly understood pillars:

  1. Get out of debt (and stay out of debt)
  2. Find ways to earn more
  3. Spend less than you earn
  4. Invest the difference

Despite the fact that many people followed those four guiding principles during the Great Recession, some "got poor quickly" instead. I believe that is because there is something else to know about the economy and how it affects our finances. This post is the first in a short series explaining what I understand about the economy and its seasons.

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How does Quantitative Easing work and what does it mean for me?

If you have ever heard talk of Quantitative Easing (QE) and "tapering," you may have been left wondering what it is exactly. The terms are bandied about so frequently these days that it is rather difficult to parse out the facts from the political hype that surrounds every move the Federal Reserve Board, or Fed, makes.

Another, more pointed question to ask might be, "Does Quantitative Easing or tapering really even affect me?" And to answer that question you would need to know:

  • What's behind the Fed's thinking
  • How to interpret what the Fed says
  • What a rate-hike means for the economy
  • How to judge what the multitude of talking heads say whenever they report this stuff

When "Old Guy" made the comment that it might be a good idea to explain Quantitative Easing for the readers of Get Rich Slowly, I couldn't have agreed more. So this post is an attempt to explain not only what Quantitative Easing is, but also how it can affect each of us -- because, esoteric though it may sound, QE is something which affects us all.

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Why gold should be part of your investment portfolio

[Editor's note: This is Part II of a two-part series on whether it makes sense to include gold in your portfolio. Part I is "Should gold be part of my portfolio?"]

This is the second installment of a two-part series about gold as an investment for your portfolio. The two posts may appear like a candidate's debate or popularity contest, but they really aren't. Our purpose is not to win an argument in either direction -- it is, simply, to provide you with both sides of an issue which doesn't have a clear-cut best side (no matter what people may try to tell you). Our hope is that this format provides you with sufficient information to make an informed decision.

Yesterday you saw the reasons why gold should not be part of your investment portfolio. And those reasons are valid, but (and you knew there was a "but" coming) before you shut your mind to the notion of owning gold in some form, you might want to ask yourself: How come, if gold was such a terrible thing to invest in, is it by far the oldest, and most consistent investment of all in the history of humanity?

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How to ladder CDs

Picture of a toolkit for an article on laddering CDs

How to build a CD ladder? It's a great question -- unless you have no idea what a CD "ladder" even is. Let's start at the beginning. A CD ladder is a method of staggering the maturity dates of certificates of deposits so you can invest your money safely and still keep some of it easily available for emergencies.

The Federal Deposit Insurance Corporation (FDIC) insures certificates of deposit (or time deposits) just like they insure savings accounts -- so they are just as safe.

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Retirement travel and frugal living

Photo of a retro RV camper

Retirement travel is in. Out is the era of spending unending retirement days on a golf course in plaid pants and interminable games of bridge with the blue-rinse set.

The new generation of retirees is looking for more adventure, with more activity … and lower costs. Few strategies deliver like the recreational vehicle (RV) retirement lifestyle. Continue reading...

More about...Retirement, Travel

Hidden advantages of savings accounts

Savings accounts? Are you crazy? Boo, hiss. These days, savings accounts are only used as joke fodder for late-night comedians, but there are benefits of a savings account. Take the mom who wants to teach her kids the value of prudent financial management, for example:

For little Bobby's eighth birthday, his mother takes him down to the local credit union to open a savings account. Figuring that all the grownups in his life would pour money into this new savings account to encourage him -- without his lifting a finger -- Bobby reasons that the offer is hard to beat. So, off to the credit union they go.

At his mother's prompting, Bobby explains to the banker that he came to open a savings account. The banker gives a knowing glance to the mother and pushes the application form across the desk to Bobby. "Well, sir, this is your account, so you have to fill it out."

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Tips for the first-time investor

Man in a row boat in a photo illustration

In a recent post regarding the survey of how people invest, the most glaring observation was that over 70 percent of respondents who have yet to experience a recession do not invest at all -- not even a tentative first-time investor -- nothing.

Since the survey didn't record the ages of respondents, it is fair to conclude that those who had not yet experienced a recession would be aged in their mid-20s.

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