Today's Market
by Dr Invest
We have an investment strategy called, "Ivy Portfolio" by Mebane Faber. This well tested method has brought some remarkable returns. The idea is to use a 9 month simple moving average and when price of the selected EFT (exchange traded fund) falls below the 9 month SMA, you sell the ETF. To sweeten the investment, I use SEASONAL CHARTS to buy at the most favorable time. As the price of stocks begins a decline in May, bonds will move inversely, gaining in value. As predicted, as my stop-sells sold my declining STOCKS, I purchased BONDS.
My portfolio to invest is set at $10,000 for my example below.
My diagram above, shows the $10,000 portfolio divided into thirds. Then, we see the bond investments divided into thirds, so that over a three month period one can safely enter a bond position.
I made my first purchase on May 2nd, investing a total of $1,111 into two ETFs, TIP and BND. I also placed a STOP-SELL 3% below the purchase price of each ETF. Today, I purchased another investment of $1,111 of TIP and BND.
Five shares of TIP was purchased at $120.70, while six shares of BND was purchased at $84.50. The total investment today was $1,231.20. A STOP-SELL was placed at 3% below today's price for TIP and BND. (So my previous gain into TIP and BND was 1.32% as of today. Even if the price of TIP and BND fell 3% and was sold, the actual potential loss would only be 1.68%. Assuming that we see another 1% gain in June, the potential loss will only be .68%. And by the end of July, assuming another 1% gain, even with a 3% stop-sell, set at the most recent closing price, the investor would see a .32% GAIN. This is precisely why we slowly enter a position, whether a stock or bond. )
Should we continue to see bad news coming from Europe and the U.S., your investment into TIP and BND will only grow. I do believe that some form of "Quantitive Easing" or new "Twist" will be applied by the Federal Reserve, but not until we hit the lows of 2011. We we continue to lose 275 points on the DOW for several more days, we will be at the low of 2011.
For the first time this year, we saw PANIC in today's market. THE SMART INVESTORS KNEW IN APRIL, THAT THE MARKET WOULD PLUNGE. Still, Wall Street kept to the mantra, "Buy! Buy! Buy!", while many were SELLING as the "Little Investors" greedily snapped up the opportunity to buy stocks that were valued a historic lows...at least according to the "talking heads" of Wall Street. Go to yahoo.com and call up the DJI chart for yourself. At the first of April there is a "sell off", Wall Street calls it a "buying opportunity" and little investors snap-up what they percieve as "undervalued stocks". When the big decline takes place in the middle of May, the smart money has left the building and those with a "buy and hold" philsophy, plus the greedy, are left with the losses. As of today, 12% losses for the year.
I am a little alarmed by the intensity of the decline. Along with me, are other investors who predict a 20% to 30% decline before hitting bottom. Some notable examples of Institutional Investors that were caught "flat footed" was JPMorgan Bank, who lost 20 billion or more. Their analysts expected a market rally.
Preparing for Potential Losses
Listen, the examples I have cited are important to you as an investor. You can't always believe what you hear on CNBC or read in Money Magazine. These are typically slick media events to spur investment into a fund, a stock, or other investment vehicles. It is a form of "Pump and Dump".
Second, when you invest, you must recognize that you will NOT ALWAYS BE CORRECT in your assessments. The object lesson here for the "small investor" is to get out of a declining investment as soon as is possible. If you invest, you will lose money. Fortunately, you will gain money too! But when investing, you want to lose as little as possible and gain as much as is plausible.
(note: the above article is for entertainment purposes only and not to be used as investment advice.)
by Dr Invest
We have an investment strategy called, "Ivy Portfolio" by Mebane Faber. This well tested method has brought some remarkable returns. The idea is to use a 9 month simple moving average and when price of the selected EFT (exchange traded fund) falls below the 9 month SMA, you sell the ETF. To sweeten the investment, I use SEASONAL CHARTS to buy at the most favorable time. As the price of stocks begins a decline in May, bonds will move inversely, gaining in value. As predicted, as my stop-sells sold my declining STOCKS, I purchased BONDS.
My portfolio to invest is set at $10,000 for my example below.
My diagram above, shows the $10,000 portfolio divided into thirds. Then, we see the bond investments divided into thirds, so that over a three month period one can safely enter a bond position.
I made my first purchase on May 2nd, investing a total of $1,111 into two ETFs, TIP and BND. I also placed a STOP-SELL 3% below the purchase price of each ETF. Today, I purchased another investment of $1,111 of TIP and BND.
Five shares of TIP was purchased at $120.70, while six shares of BND was purchased at $84.50. The total investment today was $1,231.20. A STOP-SELL was placed at 3% below today's price for TIP and BND. (So my previous gain into TIP and BND was 1.32% as of today. Even if the price of TIP and BND fell 3% and was sold, the actual potential loss would only be 1.68%. Assuming that we see another 1% gain in June, the potential loss will only be .68%. And by the end of July, assuming another 1% gain, even with a 3% stop-sell, set at the most recent closing price, the investor would see a .32% GAIN. This is precisely why we slowly enter a position, whether a stock or bond. )
Should we continue to see bad news coming from Europe and the U.S., your investment into TIP and BND will only grow. I do believe that some form of "Quantitive Easing" or new "Twist" will be applied by the Federal Reserve, but not until we hit the lows of 2011. We we continue to lose 275 points on the DOW for several more days, we will be at the low of 2011.
For the first time this year, we saw PANIC in today's market. THE SMART INVESTORS KNEW IN APRIL, THAT THE MARKET WOULD PLUNGE. Still, Wall Street kept to the mantra, "Buy! Buy! Buy!", while many were SELLING as the "Little Investors" greedily snapped up the opportunity to buy stocks that were valued a historic lows...at least according to the "talking heads" of Wall Street. Go to yahoo.com and call up the DJI chart for yourself. At the first of April there is a "sell off", Wall Street calls it a "buying opportunity" and little investors snap-up what they percieve as "undervalued stocks". When the big decline takes place in the middle of May, the smart money has left the building and those with a "buy and hold" philsophy, plus the greedy, are left with the losses. As of today, 12% losses for the year.
I am a little alarmed by the intensity of the decline. Along with me, are other investors who predict a 20% to 30% decline before hitting bottom. Some notable examples of Institutional Investors that were caught "flat footed" was JPMorgan Bank, who lost 20 billion or more. Their analysts expected a market rally.
Preparing for Potential Losses
Listen, the examples I have cited are important to you as an investor. You can't always believe what you hear on CNBC or read in Money Magazine. These are typically slick media events to spur investment into a fund, a stock, or other investment vehicles. It is a form of "Pump and Dump".
Second, when you invest, you must recognize that you will NOT ALWAYS BE CORRECT in your assessments. The object lesson here for the "small investor" is to get out of a declining investment as soon as is possible. If you invest, you will lose money. Fortunately, you will gain money too! But when investing, you want to lose as little as possible and gain as much as is plausible.
(note: the above article is for entertainment purposes only and not to be used as investment advice.)
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