How Do Cyclical and Non-Cyclical Stocks Differ?
Cyclical and non-cyclical stocks differ in type of product that is sold, as cyclical stocks represent those luxuries people only buy during successful economic periods, while non-cyclical stocks include products that people pay for no matter the economic state. Compare cyclical and non-cyclical stocks with information from a portfolio manager in this free video on finance.
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What type of stock is appropriate for you? Hi this is Roger Groh at Groh Asset Management. One of the themes that you read frequently in press releases from stockbrokers are cyclical stocks versus non-cyclical. What do they mean? It really has nothing to do with the share price. It has everything to do with the type of products that they sell. A non-cyclical stock are things that you are going to use everyday, even when there's a recession. So for instance if you're in the United States today, think about what you're buying no matter what. You're probably going to pay your phone bill, your cable bill, your power bill, you're going to buy food, you're going to buy soap, you're going to buy the basics that you need in order to get along. On the other hand, you probably will buy fewer cars. You'll buy fewer boats and from everything we've seen in the papers, we're certainly buying fewer homes. The things that you buy fewer of are cyclical meaning you buy them when things are great and when you have excess income. Is there a right time to buy cyclical and is there a right time to buy non-cyclical? Yes there is, but I'm going to leave that up to you. Be very careful though. Cyclical companies frequently go out of business so do your homework, speak with your trusted investment professional either your broker or somebody on the research side is very knowledgeable about both. Ask a lot of questions when it comes to this. If you really need help, you can always call us. Thank you very much, this is Roger Groh at Groh Asset and may the cycle be with you.