Market Based Investing Market based investing is the opposite of buy and hold investing. The buy and hold strategy conforms to tradition and authority. Buy and sell decisions are based on personal convenience, routine, predictions, rumors and news. It is a GAMBLE. The market based investing strategy accepts the Market the only authority on the market. The only tradition is, “buy low, sell high.” The Market tells us all we need to know about the market — the DIRECTION OF PRICES. We want to own what is going up in price. We don’t want to own what is dropping in price. It is that simple. The trick is to find the best tools for identifying when prices are trending upwards, trending downwards or trendless.
That is the object of market timing. Unfortunately, “market timing” has a bum rap because vested interests want to keep control of our money at all times. The media plays along to curry favor. Furthermore, most market timing systems are worthless. Many creators of market timing systems have brought disgrace upon themselves and the industry. And many investors don’t have the patience and discipline to use the best market timing systems correctly. Some investors ~ obviously, not you ~ are simply too lazy to research the selection of an investment strategy as well as they research the purchase of a new dishwasher.
After nearly two decades of looking, I realized that the most reliable market timing systems measure trend, the direction of price. I also discovered that trend systems that include a momentum component are the most efficient. And I found that the best systems have objective, mechanical buy and sell signals.
The market based mutual fund investing STRATEGY calls for investors to: 1) Use trend I.D. systems which are performance tested for a minimum of 40 years. (The latest hot systems are likely to cool before long.) 2) Require above average performance in all key criteria, e.g. “percentage winners”. 3) Upon buy signals, invest in stronger than market stock funds or ETF’s. Switch to money market funds on sell signals. 4) Match investment choice to the relevant market timing system. (E.g. Don’t use a S&P 500 based system for trading mutual funds tracking with the NASDAQ indexes. 5) Diversify your portfolio in the most important way — using different trend systems for different portions. 6) Exercise discipline in system usage. Moneyflow OTC System Details
Maximum Drawdowns Maximum Drawdowns measure risk. The drawdown from a peak measures the historical maximum drop in portfolio value. That can include a series of losses. The drawdown from entry refers to the worst loss that would have occurred if selling at the lowest price since buying. The maximum real drawdown is the drop from a high price to the sell price. A good market timing system will greatly reduce drawdowns. For example the 2005 system upgrade backtest shows the 40 year maximum drawdown on the NASDAQ Composite being reduced from 78% to 14.7%, long trades only. More Info on Moneyflow Market Timing Systems and Services
Year-by-Year Performance Year-by-year gains are an excellent way to evaluate market timing systems. That shows the investor how systems performed under a variety of market conditions. We must prefer systems having good performance in most bad years as well as most good years. Compound Annualized Returns (CAR) CAR is the proper math formula for averaging gains each year because it simulates real life better, i.e. the effects of losing years. For example, the NASDAQ 100 Index had a CAR of 14.5%, 1985-2004. The Moneyflow OTC System tests at a 23.0% average annualized return, long trades only. LIBRARY of Mutual Fund Investing with Market Timing Resources
Moneyflow Trend + Momentum = Moneyflow Our Moneyflow market timing systems should not be confused with “money flow” systems that use volume data. By measuring the trend and momentum of PRICE, alone, Moneyflow market timing systems eliminate the volume variable that erodes performance in the money flow indicators. The proof is in the performance. All market timing systems sound good in theory. Insist on performance details for 40 YEARS. Subscribe or Purchase Now
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Invest in leading stock funds when the market trend is up. Reduce exposure to market risk in downtrends. Evaluate market timing systems on the basis of drawdowns, yearly and annualized gains.