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LONG TERM INVESTORS ALWAYS KNOW MARKET DIRECTION
Really? Then why do more than 90% of equity mutual funds lose money in a down market?
If an investor who really cares about his money takes the time to do a historical study of stock market price action going back about 100 years he will immediately see the regular up and down cycles.
The first thing that is apparent is the regularity of the cycles. They occur in about 16 to 18 year tops to bottoms and the same time period back up again. The tops and bottoms will be at widely different prices. That doesn’t make any difference.
For an investor it is hard to be out of the market for long periods of time; however, within even the down periods there are times when money should be committed. It is the down times that take away profits made during the up trends.
Is there a simple accurate way to know when to be in the market and when to be out? Yes, and anyone can do it.
Don’t count on any broker to tell his long term customers to sell. His company will fire him if he has them go to a cash position. Let me emphasize right here that
CASH IS A POSITION. No brokerage company will ever tell that to its clients.
In the industry each broker has an average of about 300 customers. It is easy to see why a broker does not call clients very often. They should be advised when the market turns down to protect their portfolio.
The folks who have money in managed 401Ks or other managed accounts are at the mercy of a know-nothing fund manager. If you are a broker reading this just tell me how you managed accounts for your customers in 2000 and 2008. Don’t worry folks, no one will write to me.
Here is what I call the KISS formula for long term investing. No, I did not pull this out of the air. I was an exchange member for 17 years and owned a large brokerage company for 8 other years. What I am going to show you is based on experience, not book learning or what Wall Street teaches.
On a computer go to almost any SP500 mutual fund. Especially later check out mutual funds or ETFs you might own. Draw in a 200-day Moving Average. A good source is www.bigcharts.com. It’s free. When that 200 line is trending up it is a good time be a buyer of funds. When the line turns down sell everything and go to cash.
Now check that performance for the last 10 years and see how the return on investments would have been if the investment had been in a Buy and Hold. There is not a single example where the major index using the 200 method has not out performed Buy and Hold.
Now you know more that your broker and fund manager. From now on you manage your account.
Al Thomas’ new book, “If It Doesn’t Go Up, Don’t Buy It!”, 3rd edition, has helped thousands of people make money and keep their profits with his simple 2-step method.
The method made 10% during 2008. Read the first chapter at www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.
Copyright 2010 Williamsburg Investment Co. All rights reserved.
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