There are many kinds of index funds when investing, among which the cyclical industry index fund is one. Many new investors do not know much about the cyclical industry. Today, I will briefly explain which of the following industries are the industries to be cleaned later, and whether the first level cyclical industry is worth investing. I hope it will be helpful to you.
In addition to industries that are inherently easier to make money, there is another industry that is also worth investing in, namely, highly cyclical industries. Some industries can't make money all the time, and their profits will show cyclical changes, that is to say, three years without opening, three years without opening. The industry makes money in a good period of time, but does not make money in a bad period of time.
Why are these industries cyclical? There are three main reasons for periodicity:
1. Economic aspect First of all, changes in economic conditions will cause periodic fluctuations in some industries. The most typical is the banking industry. When the national macro-economy is good, the bank's income is good, while when the national macro-economy is bad, the bank's income is poor.
2. Policy Policies will also cause the rise and decline of some industries, such as environmental protection and military industry. These industries themselves do not make money, but they are greatly affected by national policies. If the state supports the industry, it will make money. If there is no support, the profit will be bleak.
3. Supply and demand Some industries are greatly affected by supply and demand. For example, in the energy industry, oil is a kind of energy. If supply exceeds demand in the market, oil prices will fall sharply. If supply exceeds demand in the market, oil prices will rise.
Strong cyclical industries are highly cyclical, highly volatile, and difficult to invest. Not all strong cyclical industries are worth investing in. Only strong cyclical industries that have not suffered extensive losses in the whole industry during the most difficult times of operation are worth considering.
For example, the securities industry makes a lot of money in the bull market, but it can still maintain a certain profit in the bear market, making little but not losing money.
But the steel industry is different. It makes a lot of money at the top of the cycle, but at the bottom of the cycle, the whole industry loses a lot of money, and the net assets of enterprises will be eroded. If we invest in such an industry, the waiting time from the beginning of investment to making money is too long, so we ordinary investors do not recommend investing in such an industry.
At present, we can consider the following strong cyclical industries:
Financial industry: banking, insurance, securities. Real estate industry, infrastructure industry, environmental protection industry
It is still necessary to remind ordinary investors that it is difficult to invest in highly cyclical industries, so they should consider carefully. If they are just beginning to invest, they should start with broad base index funds.
Some friends have questions about whether it is more difficult to invest in a highly cyclical industry and its returns will be better? In fact, this is not the case. Instead, it is easy for broad based index funds with low investment difficulty to master the investment method, which is simple and convenient to invest and has good returns. However, the strong cyclical industry index funds with great difficulty in investment are not easy to master the method and cannot insist on investment, so the best return may not be as good as broad base.
