How Do Cyclical and Non Cyclical Stocks Differ?

<p>Cyclical stocks are those which fluctuate up and down with the state of the economic condition and the business cycle. Some of the examples of cyclic stocks include construction, automobiles, travel, equipments sale, fine dining at pricey restaurants, steel industry, manufacturing and technology. People tend to spend on these sectors only when the economy is booming and the confidence of thriving is high. The businesses prosper well and tend to expand during these good times and consumers demand for these 'luxury products' are high.</p><p>In contrast, non-cyclical stocks, also called defensive stocks, are quite stable and are not affected by the economic fluctuations or business cycles. Some examples of the stocks include Utilities sector like gas, water and electricity, non-durable goods in the household such as toothpaste and soap and basic food items like bread and milk. They are essential for the basic human living and hence, people would never fail spending in these sectors. Hence, the economic fluctuations do not affect these stocks. However, the disadvantage is that these stocks are of the same price even while the economy is in full boom. Hence, though the non-cyclical are safer to invest, the potential of earning huge profits during the booming times are lower compared to cyclical stocks.</p><p>As an investor, you need to keep a close watch on the economic state and invest in cyclical stocks during good times to reap best benefits. However, you need to start shifting your main investments to stocks when there is a slump in the economy.</p><p>About Author: <br> Pauline Go is an online leading expert in the stock market. She also offers top quality articles like :<br> <a target="_new" href="http://www.smartstockmarket.com/stock-market/index.html" rel="nofollow">1930 Stock Market Crash</a>, <bR> <a target="_new" href="http://www.smartstockmarket.com/bond-market/index.html" rel="nofollow">Common Stock Dividend</a></p>