Glossary

A cyclical asset is an investment that tends to perform well during periods of economic growth and expansion but underperforms during economic downturns or recessions.

These assets are closely tied to the business cycle, as their performance is heavily influenced by changes in the overall economic environment. Cyclical assets often include stocks from sectors such as automotive, travel, and construction, which are more sensitive to fluctuations in consumer spending. 🔄

For example, shares of an automobile manufacturer can be considered a cyclical asset, as the demand for cars usually increases when the economy is thriving and decreases during economic downturns.

Fun fact: Cyclical assets can help investors profit from economic booms, but they can also be riskier than other types of assets, as their value can be more volatile and unpredictable. Savvy investors often balance their portfolios with a mix of cyclical and non-cyclical assets to manage risk. 🎢💼