Market cycles are a natural part of investing, influenced by economic conditions, investor sentiment, and global events. They typically move through four phases: expansion, peak, contraction, and trough. Understanding these cycles can help investors make more informed decisions and manage risk effectively.

During an expansion phase, economic growth is strong, corporate earnings rise, and asset prices increase. The peak represents the highest point before growth slows down. Contraction often follows, marked by declining economic activity and falling prices, eventually leading to a trough, where the economy begins to recover.

Long-term investors should avoid reacting emotionally to short-term fluctuations. Instead, focus on maintaining a well-structured portfolio aligned with your objectives. By recognizing where the market might be in its cycle, you can adjust asset allocations or prepare for opportunities that arise in downturns. Knowledge of cycles is not about predicting exact market moves but about building resilience through informed planning.