subject: An Easy Way to Time the Market by The LML Group Hong Kong [print this page] The LML Group Hong Kong has this opinion about: An Easy Way to Time the Market
"How did you perform during the 2007-2009 bear market?"
The advisors who fared poorly will likely struggle to get new clients or hold on to their current ones, and hence, may have trouble surviving. But the advisors who avoided most of the bear market and didn't fall prey to the classic "you must remain fully invested at all times!" should be here for years to come.
The real question you should be asking yourself if you've lost big money during the past year or two is, "How can I avoid this from ever happening to me again?" One answer, of course, is to swear off the market for good...put all your money in CDs and money-market funds. However during the next 10 years, there are going to be huge, money-making opportunities, as today's will lead to a big bull market.
No, what you want is to avoid the meat of nasty bear markets, but also profit from the current bull market. You can do it. And it doesn't take a far-seeing eye or a deep understanding of the credit markets. All it takes is the discipline to follow the market's trend.
Get familiar with charts (there are many free charting programs online) and take five minutes to look at some of the major indexes every day or two. On the chart, you want to plot the index itself (say, the S&P 500), and you also want to plot its 50-day moving average. If most indexes are above their 50-day line, you should be constructive toward stocks. If most are below, you should be defensive. It sounds simple...and it is.
But such a simple system has many advantages, the biggest of which is powerful--by following the market's trend, you're guaranteed (that's right--guaranteed) never to miss out on a major market up move, nor will you ever stay heavily invested during a punishing down move. How? Because if the indexes head south for any period of time, they will break through their 50-day moving averages...and force you to turn defensive. The opposite is true for a market advance.
What's the downside? You will be subject to the occasional new buy signal, for instance, could be reversed a couple of weeks later. And that will require you to be willing to quickly change your stance. This can be frustrating, but in the long run, they're a small price to pay for being in (or out of) the big moves in the market.
(The LML Group Hongkong)
An Easy Way to Time the Market by The LML Group Hong Kong
