November 2009
Six reasons why we love trend investing
Submitted by Van Beek on November 17, 2009 - 16:28Are you aware of all the advantages that trend investing offers to people like you and me? We have money to invest. But we do not have (or do not want to spend) a lot of time on studying boring quarterly financial reports.
We also know that you can loose a lot of money when you just buy and keep mutual funds. But what is the alternative?
In this article, we will share why we love trend investing. In summary, it is because of the following. Trend investing offers all of us the opportunity to capitalize on stock market trends and to start or continue our journey to financial independence without having to spend a lot of time on it. Let’s go into the different reason behind this.
1) Trend investing offers much better returns than just buy and hold.
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What is the best stock market strategy for you?
Submitted by Van Beek on November 11, 2009 - 15:21Are you the general who has a sound stock market strategy and who is allocating its assets towards the winning direction? Or have you been more an explorer who has been searching and attempting many roads, consuming your assets to see if you can find one road that leads to El Dorado?
Explorers sometimes struck gold, if they are lucky. But most don’t. When I invest my savings, my assets, I do not want to be dependent on being lucky. I want to be like the general with a strategy who knows where to go and how to get there.
So, what is the best stock market strategy? This depends. I know what it is for me. But every person will have to decide what the best strategy is for them. Let’s have a look at what factors play a role in making this decision.
Three factors to consider when choosing a stock market strategy
In your choice for the stock market strategy that fits you best, the following three factors are to be considered:
- Your understanding of the terrain of the stock market
- Your resources like knowledge and time
- Your enemies to rational decisions: fear and greed
The first question to ask yourself is if the terrain of the stock market is actually a terrain that you want to enter. Do you know this terrain well enough to understand its pitfalls and do you recognize the natural advantages that this hilly terrain can offer?The second question to ask yourself is how you want to enter this terrain. This has to do with the level of risk you can and want to accept and the resources you have. Do you want to put everything down to one move or do you want to spread your resources over multiple approaches? Do you have the time and relevant professional knowledge to plan and manage very detailed and complex operations, or do you want to keep your approach simple, straightforward and easy to control.
Fear and greed
Thirdly, you ask yourself how much influence emotions like fear and greed have on you when the pressure is mounting and how you avoid to fall victim to them.
Stock Trend Investing is the stock market strategy that is best for me. The trends in the market are like the hills in a terrain. They offer the natural opportunity to make solid gains. Mutual funds and ETF’s offer the possibility to spread resources without having to spend too much time on getting detailed knowledge of individual companies. And the buy indications and sell warnings from the Stock Trend Investing system provide a framework to keep a check on fear and greed while still giving room for individual judgment.
What is the best stock market strategy for you and why is that? Please share your comments with us.
The secret of stock market timing
Submitted by Van Beek on November 8, 2009 - 03:39How can correct stock market timing give you a way much better investment result than just buy and hold? One basic investment strategy is to buy stocks and hold them for a long, long time. The rationale behind it is that if you look historically, stocks have made very good returns every year on average. Let’s take the Dow Jones index as an example.
The Dow Jones for example is up 267% over the last 20 years. This is thus an average annual compound increase of 6.7%. This means that if you would have invested 20 years ago 10,000 dollars in a Dow Jones index fund, this would have netted an average annual increase of 6.7% and resulted now in a stock holding with a total value of 36,700 dollars. This is excluding dividends.
However, take into account that the Dow Jones index closing for October 2009 is 30% lower than its highest all-time month closing of October 2007, 2 years ago, while still being up more than 37% compared to February 2009, 8 months ago. And consider that the Dow Jones index fell 34% between December 1999 and September 2002, while it increased again 83% between September 2002 and October 2007.Use stock market timing to turn 10,000 dollars into 72,000 dollars
The point I want to make with all these figures is that any investor who started with a Dow Jones index fund 20 years ago and who realized that it was wise to sell in Q1 2000, buy in Q4 2002, sell in Q4 2007 and buy in Q2 2009, would have made way more money than an investor who just buys and holds.
The 10,000 dollars from 20 years ago would have become 72,000 dollars now, meaning an average annual increase of 10.4%. Compare this 72 thousand with the 36.7 thousand mentioned above and think which one you would prefer.
Thus to me the secret of stock market timing is to recognize when the big trend shifts happen. In hind-sight it is always easy by looking at a historic stock market chart. The important thing is to realize it at that time so that I can act on it. In that way I can capitalize on the stock market trends and continue my journey to financial independence.
Rational stock market timing decisions that take little of my time
Thus for me, it is not about every hour or day to see how the stock market is doing. The great thing about this is that it takes very little of my time. I do follow the news, but only once after each month I make a decision if it is time to increase or reduce my stock market investment. To make these stock market timing decisions in a rational way without letting fear or greed drive me to do things I would later regret, I use the Stock Trend Investing strategy and system.
Have you made any stock market investment decisions that were driven by fear or greed and that you later regretted? Register or login and share your experiences with the Stock Trend Investing community.
Who else wants to ride stock market trends to create a fortune?
Submitted by Van Beek on November 3, 2009 - 16:12Remember this guy in Singapore a few years ago who bankrupted this big bank he was working for? He was betting on a certain trend and when he was wrong he was betting more, and more, and more on this same trend, to try to recover. The trend did not turn. In the end he lost it all. Stock market trends can make or break any investor.
I love stock market trends. I think they are great. They enable me to make good money on the stock market without having to spend a lot of time on researching specific stocks. Because of my beloved stock market trends, I do not need to hire and pay any expensive advisors. I just ride the trends.
Look at any ordinary day to any of the stock market indices like the Dow, NASDAQ, FTSE or Nikkei. Most of the stocks in those indices move that day in the same direction. The same is valid for longer periods.
How to see the trend
When you look at a period of a few months, most of the stocks move in the same direction and create the overall market trend. This is not just valid in one country. We live now in a global economy and in general most stock markets around the world trend in the same direction at the same time.
How wonderful would it be to know in which direction the stock market trends go and ride them to riches? Actually, to see the direction of the trend is easy. Simply, do not look to close. If you just follow the news everyday, you probably do not see the trend. There is too much movement and noise.
Take a step back and look at a chart that shows how a stock market index has developed over a number of years. The trends that last 3 to 6 months or longer are easy to spot. These are the stock market trends that I like to ride.
Key question
The key question for every trend rider is: when do they start and when do they turn? To benefit maximal from a trend, you want to ride it as early from the beginning as possible. And you want to ride it as long as possible till the trend really turns. In hind-sight, looking at a chart, pin-pointing the ideal moments to step in and out is easy. However, to identify those moments in the moment is something different.
I use the proven Stock Trend Investing system to define the moments when to step in on stock market trends and when to step out. Do you have a system, strategy or tool that helps you to define these critical moments? Please register or log-in and share your approach or questions on this.
Do you sleep like a baby when your stock market investment devalues
Submitted by Van Beek on November 1, 2009 - 09:26Do you run for safety and move your stock market investment into a low interest savings account or do you stay put after last weeks decline?
Every month, I use the Stock Trend Investing system to decide what I am going to do. This system provides me with buy-indications, correction-warnings or sell-warnings for a number of stock market indices around the world. Accordingly I make changes in my stock market investment.
All indices that we follow had a lower ending in October than their September ending except for the Dow Jones Industrial Averages Index, the Hong Kong Hang Seng Index and the Chinese Shanghai Composite Index. The Dow’s October ending was almost identical to a month ago. Thus the only indices that we follow and that showed real positive gains during October are the China related indices.
What buy indications and warnings do we have now for your stock market investment?
Overall the trend is still up with some warnings for a possible temporary correction.
The US indices do not give us a buy indication but give still a warning for a correction since they went up so much during the last period.
In general the European stock market indices do not give a specific buy indication, sell warning or a correction warning for our stock market investment after their declines in October.
In Asia, Hong Kong and Shanghai still show sufficient positive momentum and trigger a buy indication while both at the same time provide a warning for a possible correction since they increased so much during the past few months.
The Japanese Nikkei does not give any specific indication, signalling to us to hold our holdings and not to ad to them. The Sensex in Mumbai continues to give a warning for a correction. Even after last months decline, it still has gone up so far during the past period that you should be aware of the possible correction.
Gold has gone up for 4 months in a row and is on a roll. No warnings yet that it has gone up too much or so. Our system gives for Gold a buy indication.
What I will do
Given the current situation, I do not increase or decrease my stock market investment. I will see if I sell the put option I have bought last month on one of the European indices with some profit. If I do that, I will buy a put option on one of the US indices (S&P or NASDAQ) to cover for or benefit from a possible correction. However, since the stock market indices in the world follow each other in general, I may decide to keep my put option on one of the European indices since I expect them to follow any correction in the US markets. In this way I save some trading costs.
I do not buy any Gold yet since I have not figured out what for me the best way is to buy Gold.
Please leave a comment to this blog post and share with us what you will change in your stock market investment after the October closing.
