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Yoshikami: Don't Fight the Cycle

In sports, it’s important to play defense AND offense. In investing, the same holds true.

After months of defensive strategies, consider your overall offensive strategy as we seem to be seeing an apparent turn in the world's economic fortunes. To be sure, there are still many bumps in the road and it won't be a smooth recovery. Still, hope is emerging and as an investor, you need to be prepared with a strategy to capitalize on a more promising environment.

Cyclical investing is a strategy designed to take advantage of macro changes in the economy. Sectors such as technology, infrastructure, and heavy manufacturing are cyclical industries that tend to do well when the economy recovers. Names like Caterpillar and IBM are solid cyclical names that will profit as world growth restarts. Additionally, investing in commodity assets such as industrial metals and food products is a strategy that holds merit in an improving global economic climate.

Just because you are moving into offensive names, doesn't mean you leave out defensive counters completely —they're still necessary. Having cash and a healthy dose of quality, fixed income, makes sense for balance and future opportunities. In some cases, equity names can also be a defensive part of your portfolio. Pfizer , despite concerns about health care reform, has strong cash flow and a high dividend yield. It's an equity with a fixed income yield.

Expect to continue to hear gloomy forecasts of impending doom. I think a more balanced view is that growth will be soft for some time to come and to expect a muted recovery. Under this scenario, playing defense and offense together is the best way to maximize returns while still letting you sleep at night.

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Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at m@ycmnet.com.