Cycles Matter: Achieving Your Financial Goals Through Up and Down Markets

Most of us aren’t fans of change and risk. Unfortunately, those are two words that go hand-in-hand with investing. We need to invest our money to achieve enough growth so we can reach our ideal retirement, but the very nature of the economy and markets is unpredictable. The only long-term guarantee in investing is that there will be short-term fluctuations. 

That’s no reason to hide your money under the mattress. It just means that you need an investment strategy that is not only highly disciplined and logical but also built to anticipate and adapt to ever-changing market conditions. That’s what we call full-cycle investing.

Our Investment Strategy: A Full Cycle Perspective

At My 401K Consultant, we aim to be full-cycle investors. We strive to correctly navigate the important economic turns in growth and inflation so we can help you achieve long-term wealth and retirement savings accumulation. Here’s how it works:

The Process

Using analysis and mathematical calculations, we determine the rate of change in growth and inflation. These are the two most important factors that determine how different investments behave when economic conditions change for better or worse. There are 30 pieces of economic data released each month, for a total of 90 per quarter. We record and measure these data points as they are released in real-time, resulting in a firm grasp on whether there is an acceleration or deceleration taking place in either growth or inflation. 

There are only four possible economic scenarios, referred to as the Quads. For example, if growth is decelerating and inflation is decelerating, we call this Quad 4. This quad calls for an investment mix that is vastly different from Quad 1, which involves accelerated growth and decelerated inflation. Therefore, the use of math and modern computing techniques enables us to determine, which Quad we are currently in according to our model, and which Quad we believe is most likely to come next.  

The second part of our process incorporates a matrix of price, volume, volatility, and other factors as a quantitative overlay to the Quads. We use this quantitative overlay as a method to test if financial markets agree or are beginning to agree with our Quad assessment. Much like in science and engineering, this is our version of an A/B test, one that occurs every day. Once we have this valuable information, we shift assets into the investments that have the highest probability of a positive return in that particular Quad according to our model. At the same time, we avoid investments that have a high probability of a negative return. Our investment universe consists of stocks, bonds, commodities, currencies, real estate, and precious metals.

Why Does Full Cycle Investing Matter? 

When you read market news, the numbers you see are often year-to-date results. But those numbers rarely give the full story. That’s why we define our results from major turning points in financial markets instead. 

Let’s look at an example to give you a real-world picture of how this works. The last major turning point for the S&P 500 was October 1, 2018. From this all-time high, stocks promptly dropped approximately 25% over the three months going into Christmas 2018. From this bottom, the S&P 500 finished up 29% for 2019. 

This sounds great on the surface. However, if we measure results from that major turning point, we find that the S&P 500 rose only 10.5% from October 1, 2018, through December 31, 2019. Basic sixth-grade math will tell you that a 25% loss requires a 33% gain just to get back to even. A 50% decline in your retirement fund back in 2008 required a 100% gain just to get back to even. Back then, breaking even didn’t occur until 2013, 4 years later. Once you understand the math, you quickly realize that avoiding a big decline (risk management) must be a key part of your investment strategy. Therefore, these are among the reasons why our strategy incorporates risk management, the Quads, and the A/B test.

Full Cycle Investing And Your Future

At My 401K Consultant, we use full cycle investing as a way to help you achieve maximum growth. Our investment strategy acts as your security guard and early warning system all in one, helping you avoid the disastrous losses that take years or decades to recover from. If you have questions about our investment strategy or are curious if it would work for you, schedule a free introductory 15-minute phone call today! 

About Michael

Michael Klonsky is a CERTIFIED FINANCIAL PLANNER? practitioner and Accredited Investment Fiduciary? designee with more than 20 years of experience working with individuals, families, business owners, and professionals. He specializes in guiding his clients to a financial investment plan customized to their needs, empowering them to take control of their retirement savings. Michael graduated from Ohio Wesleyan University and spends his spare time staying involved in his community. Mike is a past president of the Massachusetts chapter of the Lymphoma Research Foundation. He dedicated his 2012–2013 triathlon season to raise money for the Massachusetts General Hospital’s Cancer Center. Mike is training to swim the English Channel in August 2021 to continue his fundraising for the Cancer Center and to help fight childhood hunger in the United States. Mike was recognized as a 2010 Massachusetts General Hospital Cancer Center honoree for being one of the 100 individuals whose diligence, philanthropy, and passion have helped advance the fight against cancer. Mike enjoys staying involved with his children’s many sports teams, participating in open water swimming, and skiing. He and his wife, Toni, reside on the North Shore of Boston with their children. To learn more about Mike, connect with him on LinkedIn or schedule an appointment with him online.

Securities and Advisory Services through Commonwealth Financial Network, Member FINRA/SIPC, A Registered Investment Adviser. Fixed Insurance products and services offered through New England Wealth Management. 

New England Wealth Management does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. 978-739-4900, 27 Garden Street, Suite 1A Danvers, MA 01923.

Computer models used are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results.