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Friday, June 26, 2009

Market Timing That Actually Works

Many people look for ways to time their entry back into the market. Even though their timing was lousy on the way out, they are still convinced that they can time their way back in!

Why did so many folks lose retirement funds in their IRA's and 401k's? Because they are still holding fast to the old buy-an-hold strategy.

In watching CNBC this morning I saw an example of the very thing I have been preaching about for years now. Mark Haines and Erin Burnett anchor their show "Squawk on the Street", from the New York Stock Exchange. They are always asking investors and corporate executives if it is safe to go back into the market yet. This morning Erin said something like, "With all these professionals trading and going in and out of the market, how does a regular person like me time their entry into ETFs or stocks? Does the buy and hold strategy even work anymore?"

The answers to her questions are not important here. Her statement reveals a LOT, and is what we have been telling folks for years. The Professionals are "Trading" their money. They don't buy and hold, so why should you?

During the meltdown, they were shorting the market and riding it down. During the rally they were riding it back up. The same thing we were doing as index traders. Yes, there is market timing involved, but not in the sense of "is it safe to get back in yet". That is a foolish game in our opinion. The short daily swings in the market are MUCH easier to predict than the overall long term direction. Even while folks are waiting during a several day rally for the right market timing to get back in, traders are riding it up or down many times on the smaller moves.

Sure, there are many things you could trade, and they all involve timing to some extent or another. In fact, the index trading that we do is all about timing. The big difference is that we are NOT looking for some magic moment to get back in the market and hope it keeps up trending for years to come. We will take whatever the market throws at us. That is market timing that really works. If it changes we can quickly get out and go the other way if we choose to.

You can do the same thing with your IRA, 401k, or other retirement account if you want (we like the Roth, so that all of your trading income can be Tax-Free). Don't wait for the magic moment to get back in, and get your account growing! Pick up some trading skills, and use the type of market timing that really works!

Monday, June 15, 2009

Timing Your Way Back Into The Market

You hear much on the news these days about when and IF a person should get back into the market. Millions of folks who lost over half of their 401k and other retirement accounts are wondering the same.

My answer to that question is identical to what I was advising before the meltdown - and the answer is simple:


At least not with your longer term investments anyway. I have been preaching that buy and hold is dead for some time now (yes - even before the big meltdown came). The only exception to this rule might be with MLP's (but that is a topic for another day).

As index traders, it is true, we are all about timing. We look for a high probable set-up and we jump in for some quick rides, and we get out just as quickly. The overall state of the economy does not really effect our trades, so we don't have to guess if it is the right time to get into the market.

What I'm suggesting - NOT to time - is a long term entry back into the market. If you are just wanting to get back into mutual funds and let them ride, there will NEVER be a good time to get back in the market (if you are still sold on mutual funds for your retirement accounts, do yourself a favor and soak up some knowledge on ETF's -Yahoo finance is a good place to start - look under the "Investing" tab at the top of the page).

Many investors are seeing this 2 month rally and are still setting on the sidelines wondering if it is time to get back in. If they knew how to trade (what do you think the big boys are doing with your money in a back office somewhere), they would have been making entries and exits all along. We ride it down and we ride it back up! No matter what the market is doing, we can take profit.

Statistics show that over 80% of investors have no plan for making money when the market is dropping. Why put yourself in that position? If you learn to make short-term trades, you will never have to second-guess the bulls and bears. Just learn to take what it gives you (and of course my favorite way to do that is with Index Trading), and don't try to time the market!