Rule 3: Know Which Assets to Buy and Sell

Panos Mourdoukoutas () and Christopher Bates ()
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Panos Mourdoukoutas: Long Island University
Christopher Bates: Long Island University

Chapter Chapter 4 in Intelligent Investing in Irrational Markets, 2025, pp 31-48 from Springer

Abstract: Abstract After developing a financial plan, investors must closely monitor the price of different assets that are closely correlated with macroeconomic and financial conditions, which may provide tailwinds or headwinds that affect their price performance. Stocks and commodities usually perform well in an expanding economy, while bonds usually perform well in a weak economy—though their performance depends on the factors that drive different business cycles and on historical valuations at the point of entry to an investment position. Bonds also perform well in the aftermath of a financial crisis, as investors cash out from stocks and commodities, as was the case in the financial crisis of 2008. This means that investors must diversify their portfolio not just across stocks, but also across asset categories—adjusting their allocation according to the direction of the economy.

Keywords: Asset Allocation; Business Cycles; Demand Side Expansions; Supply Side Expansions; Interest Rates (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/978-3-031-90010-5_4

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