Investment Strategies 02 (Jun 10 - Jun 13)

[kennynah]

short term pain, long term gain.

wa...ang moh....kuat kuat hor....

[winston]

Don’t Risk Missing a Significant Rebound by Alexander Green

Despite the stormy weather, you should cast a few lines right now. It may be tempting to simply wait until things “settle down” but then you run the risk of missing a significant rebound.

In short, tune out all the end-of-the-world hysteria and think rationally.

• As a long-term investor, shift money in cash and bonds into stocks.

• As a short-term trader – and you may well be both – scoop up great companies selling at unusual discounts – there are plenty of them out there – and adjust your stops to protect your gains.

You’ll thank me when things get back to normal. As they always do eventually.

http://www.investmentu.com/2011/August/ ... arket.html

[winston]

Investing rules during uncertain times

Here are some tips to keep you sane during these volatile market periods:

1. If you can't take the stress, don't invest

If you find that you can't sleep and are constantly worried about your investments, then put them into something safe. You have to do what you are comfortable with. Life is not just about investing — your health is important too.


2. Stay calm

Don't panic and sell just because everyone else is doing so. Market bottoms are usually marked by investor capitulation when they sell stocks irrationally out of fear.


3. Keep your powder dry

During uncertain times, allocate a certain portion of your funds as an opportunity fund, so that you can take advantage of extremely cheap stocks if a terrible crisis hits.


4. Look at safe haven assets

More experienced investors can also start to diversify some of their funds into Swiss Francs, precious metals (such as gold and silver), and blue chip high-dividend names. .

Remember that there is opportunity in every crisis, but you must be prepared in order to take advantage of it!

http://sg.finance.yahoo.com/news/What-m ... 1.html?x=0

[LenaHuat]

Winston's double posting in such uncertain times Good re-reminder.

[winston]

5 STRATEGIES FOR VOLATILE MARKETS by Charles Rotblut

The biggest investment mistakes are often made during market corrections and bear markets.

It is not uncommon for an investor to sell too late into the decline, locking in losses, and then wait for confirmation that rebound is underway, missing out on big gains.

(Short-term reversals, like we had earlier this week, often magnify the mistakes by adding to the uncertainty of where stock prices are headed.)

http://pragcap.com/5-strategies-for-volatile-markets

[winston]

How to Get a Little Bit Richer Every Day By Mark Ford
Tuesday, August 30, 2011


Of the hundreds of wealth-building strategies I have tried over the years, the best one was also the simplest. It is this: Make sure you get a little bit richer every day.

This thought occurred to me almost 30 years ago. I had recently decided to become rich, and that decision had me reading and thinking about wealth building day and night.

I had daily fantasies of getting rich in all sorts of fancy ways. But deep down inside, I knew complicated strategies were not for me. When it came to making money, I was extremely risk averse. In the race to a multimillion-dollar retirement, I was a tortoise, not a hare.

At the time, I had a net worth of zero and an annual salary of $35,000. With three small children and my wife in college, our expenses were gobbling up every nickel of my after-tax income. And so my first wealth-building goal was small: I would get richer by just $10 a day.

I knew that I would eventually raise the ante, but I wondered, "How much money would I acquire in, say, 40 years by just putting an extra $10 aside every day in a bank account earning 5% a year?"

I did the numbers and was happy with the answer: almost half a million dollars.

My total capital invested would be $149,650. The simple interest would total $156,950, and the compounded interest would amount to $182,061, for a total of $488,661.

Then I wondered, "What would happen if I put away $15 a day?" That came to $719,604.

And then I asked, "What would my retirement fund grow to at 8%?" That came to $1,620,592!

You can imagine my excitement. And so I made this my No. 1 wealth-building commandment: Get a little bit richer every day.

But I soon realized I couldn't follow this rule consistently if I invested my money in stocks. The market fluctuated too much. One day, I'd be worth $110,000, for example, and the next day, I'd be worth $108,000.

My friends and colleagues who knew more about investing than I did told me not to worry about these short-term fluctuations. They said that if I kept my focus on the long term, I'd get the 9% or 10% that the market delivers over a long period of time. But even though I understood the principle, I didn't want to settle for that.

I resolved the problem. I put the bulk of my retirement savings into municipal bonds, high-yielding bank CDs, and unleveraged rental real estate properties. This drastically reduced my portfolio's volatility but it also, in theory at least, reduced my expected ultimate return on investment (ROI).

I compensated for that lower ROI by taking on more work and devoting a portion of that extra income to my retirement savings. That ensured that I was always ahead of my schedule – even if the ROI I was getting on bonds, CDs, or real estate dropped.

This simple, tortoise-paced program worked. Since I made this resolution in the early 1980s, I have never experienced a single day of being poorer than I was the day before.

Think about that.

And there's more… Submitting yourself to this commandment will change the way you think and feel about building wealth. It will help you appreciate the miracle of compound interest. It will make you less accepting of risk. It will make it easier to understand the benefits and drawbacks of every type of investing. And it will turn you into an income addict, which is, in my book, an essential component of thinking rich.

If you want to use this strategy for retiring rich, begin, as I did, with a goal of $10 a day. Once that becomes easier, you will find that you want to raise the ante. You could hike it to $15 a day, as I did my first year… But soon thereafter, your addiction to income will make it possible for you to raise your target much higher than that. These days, my target is $10,000 a day – and I do it without worry.

I have explained this strategy to lots of people over the years. And I don't think a single one ever took it seriously. Perhaps it didn't seem clever enough for them. Or perhaps they felt they were already doing well by following the investment schemes they were using at the time.

But none of them ever acquired the wealth I did. They sometimes had great individual hits they'd tell me about – or even streaks of winners when the markets were favorable. But as time passed, Mr. Market always had his way with them.

In the race for wealth, I've always been a tortoise. But by following this simple rule of getting richer every day, I was able to do better than I ever expected, without a single day of feeling poorer than I was the day before.


Source: Daily Wealth

[winston]

I Hope You Can Apply This Investing Lesson Faster Than I Did
By Dr. Steve Sjuggerud
Monday, September 12, 2011


I don't know why I've been so hard-headed. I don't know why I've wanted to fight the truth.

Maybe it's because the truth seems too simple – too good to be true.

Maybe it's because I enjoy the challenge of trying to predict when the wind will change direction. But that's a fool's game, particularly after you learn what I'll share with you today.

Here's the truth: The stock market trends… It goes up. It goes down. And history shows you'd have beaten the market – with dramatically less risk – simply by sticking with the existing trend.

Sounds crazy, I know. I didn't want to believe it myself at first. It's not what I learned in school. But it's true. And it works. I'll show you how today.

Simply own stocks when they're going up. Get out when they're going down. Doing that has beaten the market… with less risk.

It's hard to believe this incredibly "dumb" strategy could perform so well, especially when just about any other strategy sounds more intelligent.

But take a look at this chart… It follows a simple system that I'll explain in a minute. In short, you want to own stocks when it's green. And you want to stand aside when it's red.

And it's not just limited to the past 15 years…

Here are the results of this same system from 1973 through 2008, from an academic paper by my friend Mebane Faber. This simple system (called "Timing" in Meb's table below) has delivered higher returns and, more importantly, much lower volatility. That's the Holy Grail for investors:

So Meb's paper shows it's worked since the early 1970s… But what if we go further back?

The results are roughly the same, going all the way back to 1900… higher returns… with dramatically less volatility. Here are the system's returns from 1900 to 2008 (again from Meb's paper):

The system is so "dumb," you won't believe it.

You own stocks when the S&P 500 index is above its 10-month moving average. You sell when it's below it… and move to cash (short-term Treasurys). There's nothing magic about the 10-month average, by the way. You can use the eight-month, nine-month, 11-month… whatever. You're just looking for the trend.

(It's easy to calculate any of these, too. To get the 10-month average, add up the last 10 monthly closing prices of the S&P 500 and divide by 10.)

Academics want to find more complicated relationships than this one.

Me? I just want what works for you – my reader. For our True Wealth Systems service, we have tested just about every academic system under the sun, from the super-simple to the extremely complicated.

It's hard to believe, but this "dumb" system actually beats most systems. It beats the markets over most long-term time frames, with much less risk. And that makes it a Holy Grail system… simple or not.

I admit it. I'm guilty of trying to outsmart this little system… I'm guilty of jumping the gun, and jumping in before this system says to buy. Most of the time, this dumb system has been right… and my more brilliant reason for fighting it was brilliantly wrong.

I hope you can learn this investing lesson quicker than I did. It's taken me years to get this simple idea through my thick skull. I've tried to outsmart it for years, and it's done me no good…

Right now, this dumb system says stand aside. I promise I will let you know here in DailyWealth when it changes its tune…

But for now, the trend is down. Don't fight it.

www.dailywealth.com

[iam802]

...

You own stocks when the S&P 500 index is above its 10-month moving average. You sell when it's below it… and move to cash (short-term Treasurys). There's nothing magic about the 10-month average, by the way. You can use the eight-month, nine-month, 11-month… whatever. You're just looking for the trend.


....
http://www.dailywealth.com

This guy is fantastic. 10mth moving average??!!

In my opinion, 10mth MA is like the following scenario:

1. Active traders has confirmation on bullish move on Daily Chart in Jan.
2. Semi-active traders/investors has confirmation from Weekly Chart in around March
3. Newspaper start reporting on bullish move in the market around May..June...July..August..Sept
4. The passive retail traders/investors finally got their confirmation and jump in as well.

What do you think? Who wants to use a 10mth moving average? Or even a 9mth or 8mth moving average?

[kennynah]

for a longer term trade, we some timesuse 200DMA. most of us use 50DMA... if we assume a 20 trading days per month, then 200DMA actually corresponds to 10 months average daily reading... pls correct me if i got this all wrong

[iam802]

for a longer term trade, we some timesuse 200DMA. most of us use 50DMA... if we assume a 20 trading days per month, then 200DMA actually corresponds to 10 months average daily reading... pls correct me if i got this all wrong

Ok, yes..it make more sense if you use 200 MA instead of saying 10mth MA

My mistake.