“It’s easy to stand in the crowd but it takes courage to stand alone”

― Mahatma Gandhi

Investing in a cyclically-driven investment portfolio is among the most challenging endeavors in finance. The main problem that most encounter is being contrarian. Standing against consensus trades and opinions is very difficult in practice. It is not intuitive and against the popular stance. Moreover, a systematic approach to cyclically-driven investing is not about rigorous diversification. Instead, a planned risk concentration gets monitored very closely. Last but not least, taking risks involves declining returns over extended periods until things sort out.

Cyclically-driven investing involves a combination of non-intuitive factors that are even individually uncomfortable to most. Not surprisingly, very few professional market participants can navigate asset cycles systematically. The framework is even more challenging for non-professional investors. Therefore, the approach is not appropriate for the vast majority. Those who are willing to take on the challenge should be prepared to commit some resources. Professional investors often make small commitments during extended lock-up periods before gaining confidence in cyclically-driven investment skills.

Cyclically-Driven Overlay

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