Thank goodness for electronic publishing. In the old days of ink and paper, my words today would be stained with my tears. Why is that you ask? Today I dropped my daughter, Julia, off at her first day of kindergarten. My wife and I spent the last few years preparing her for this moment, but somebody forgot to tell me to be prepared for how difficult it was to hug her goodbye.

Oh sure, I’ll see her this afternoon, but I felt my heart leave me today in a way that can only come with parenting. I honestly thought I was ready for anything. Obviously, I was not ready for her first day of the rest of her life.

Investing can take on a similar path as parenting. We prepare and we prepare and we prepare. Some days we do well, and on other days we don’t. We simply do the best we can.

As an investor, those who are prepared will generally see prosperity over the long haul, but that doesn’t mean there won’t be bumps along the way. In preparing my model portfolio for the future, I strictly follow the business cycle. I let this up-and-down process of economic growth dictate my decisions (I also think that election season is a great time to sell stocks. Here’s why.)

When we are at a bottom in the cycle I want to be very aggressive with my investing. When we are at the top, I want to be cautious. Take my Rational Investor model portfolio (you can get all of my model portfolio information on my Rational Investor model portfolio at www.investorplaceblogs.com). At the start of this year, I was convinced that we were at the top of the most recent business cycle that had started in late 2002, early 2003.

Having been well beyond that typical 4-year date of the average cycle, I thought it would be prudent to take a more conservative approach with my portfolio. To do so, I kept about 70% of the portfolio in a cash position. With the rest I took a handful of short positions using exchange-traded funds.

That was a wise strategy, and it has served me well. While the rest of the market tanked, I waited and I waited and I waited. I had cash in the bank, and at some point, I would be able to step in to begin a buying spree in anticipation of the start of a new business cycle.

Back then, I estimated that the next great buying opportunity would begin in October of 2008. My plan was to be patient and bide my time with a few select short positions.

That patience was tested early as the market moved lower much faster than I had anticipated. In March, we reached bear market territory for the major indexes. Buying ensued, but I sat idly by watching the action (see also, “Buy Stocks that Are Right On Target“).

If I missed some of the upside of the new cycle, so be it. I trusted my path as I have found that doing so historically produced very impressive results. Like I said, there will be times when I am wrong, but always having a plan and stick to it is the best advice I can give to anyone.

Sure enough the market after a nice rally retreated once again. This time around, the selling was caused by oil prices rising to nearly $150 per barrel in early July (see “The Oil Stock Pyramid Scheme“). The economy was crumbling before my very eyes.

My October plan could wait no longer. With desperation at fever pitch, I made my one and only adjustment to the plan. I covered my shorts and deployed my cash across multiple sectors that I believed were poised for a 1-3-year rally.

I did keep about 30% of the portfolio in cash as an insurance policy against another retest of the lows. Indeed since mid-July we have bounced along the lows forming a strong base of support for the next move higher.

My plan then is to deploy the remaining amount of cash by October. In fact, I want to be very aggressively long at that time and to get there I will be willing to use leverage. That means I will borrow funds that can be deployed long stocks.

Keep in mind that some of the biggest gains in a bull market occur at the beginning of a new business cycle. That is where we are at today. No need to make any guesses with this approach. It’s the economy stupid! Follow its lead and you will be prepared for prosperity (see also, “Dell (DELL): The Next Generation Growth Story“).

How I handle my daughter leaving me for kindergarten is another story. I honestly thought I was ready. Clearly I was not!

This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight likes this, go to: www.InvestorPlace.com.