Chennai: Like we experience cycles when it comes to weather (summer-monsoon-winter), the economy too goes through cycles.
A growing economy is supported by business activity and innovations. But everything that grows reaches a saturation point, beyond which the same efforts do not give the same results.
Hence, the economy starts slowing down after a phase of growth and expansion. In the phase of slowdown and recession, business activity drops. But as businesses start cutting down on expenses and figuring out more cost-effective ways to expand, the economy starts growing again. This is the ongoing business/economic cycle.
Each phase in the business cycle presents unique investment opportunities. So, incorporating business cycles themes into investments helps make the most of the current economic environment.
A K Narayan who is an independent financial and mutual fund adviser and founder of AK Narayan Associates says, ‘Business cycle fund can be seen as a dynamically managed flexi cap fund, which again acts like a ‘go anywhere’ fund offering the fund manager the flexibility he needs to navigate today’s uncertain market.’