By Al Thomas
Someday you may want to retire and continue to live in the life style to which you have become accustomed.
That will be a neat trick in today’s market.
According to conventional wisdom you will need less money because you will have fewer expenses than when you had to go to the office every day. Maybe. Let's hope so.
Unfortunately, it doesn't always work out that way so you better have saved enough cash to supplement the Social Security and pension plan income (if you have one).
My philosophy is to save with mutual funds and ETFs as they are the safest way to invest in the stock market. There is one and only one basic criteria as to which equities you should own. You must have a stop loss on every one in case the market starts down again. And it will.
Don't listen to the Wall Street gurus who tell you to buy a "good" stock or fund and stay with it. The only good stock, ETF or fund is one that is going up... The hogwash you get from the great stock market "experts" is you need to look at how a fund has performed over the last 3, 5 or 10 years. Double hogwash. Ever hear the story about "what have you done for me lately"? You don’t want to own any equity when it is going down. It holds true for all stocks, ETFs and mutual funds.
Look up the big fund manager names on Wall Street. You will find that in the last 10 years all of them have had periods when they did not do an average job. You don't want to own any of their funds while this guy is going through a 'cold' period.
When you are adding a small amount monthly to your IRA or 401k you will want to specify where those additional funds are to be invested. Always put them in the best performer at the time. If everything is going down go into the money market.
If you own more than one position, say six, you should sell the weakest one and transfer your money from number six to number one. Sell the dog and invest in the top performer. Prune your portfolio monthly.
Every fund manager will tell you this is too simplistic. It works. He is lying. Why? Because he is being paid on the amount of money in his fund and not upon the performance of the fund. It is called 'you buy, he holds'. It might be a loser; most of them are professional losers. Look at a 10-year chart. Why should you go down with him too?
Review your positions monthly and stay with the best ones.
Maybe you can retire.
Copyright 2013 Williamsburg Investment Co. All rights reserved. Al's new ebook (32 pages) is available on Amazon.com for 99 cents. It explains the Golden Cross and the Death Cross. These are well known methods of determining long term trends in the market. If you only learn one method of technical analysis this would have kept you out of the 2000 and 2008 crashes and will keep you out of the next one that is coming soon. The title is Never Lose Money In The Stock Market Again.