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Investment Timing
The concept of investment timing is directly connected to the business life cycle. These are connected since there is evidence that the stock prices anticipate changes in the business life cycle by period of up to six months at a time (Bodie, Kane, & Marcus, 2013). In this regard, investors will usually perceive changes and act accordingly.
Once they perceive an impending a boom, stocks are purchased since they are not vulnerable to a recession. Once they perceive a downturn, they sell off the stocks and replace their portfolios with fixed income securities. Towards the end of a recession, the investor sells the fixed income securities and replaces them with stocks.
In the case of Universal Auto, and if the assertion by Adam is correct, the ideal time to invest in the stock of the passenger car company would be towards the end of a recession. If as per Adam’s statement, the recovery is underway, the stock should currently be indicative of the better tidings in terms of economic recovery, and this would be the perfect time to purchase the stocks of the passenger car company.
References
Bodie, Z., Kane, A., & Marcus, A. J. (2013). Essentials of Investments. New York: McGraw-Hill/Irwin.
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