Market Frustrations
I bought that stock a month ago and it hasnt done anything. My broker said it was going to take off. Yes, and pigs can fly.
How about, I bought that stock 5 years ago and it went up and now is selling for less that it did when I bought it. Do I hear the violins playing?
There is an old, old saying; THE STOCK MARKT WILL DO WHAT IT WANTS TO DO, BUT NOT WHEN YOU WANT IT TO. You may have heard that one and todays market is doing just that.
When there is an obvious trend up and people are buying as we had from 1982 to 2000 everyone is happy. Each person thinks he is a stock market genius. For 18 years it was difficult to make a mistake. Even if you bought a dog (no reflection on mans best friend) it would go up. When the market started down the geniuses looked at each other and did not know what to say. There was silence in the boardroom and commiseration by the water cooler. Everyone was losing.
Probably one of the most frustrating investment periods of all is the sideways market that we have had for the past year. The talking heads on CNBC-TV say it is not a broad market in which you can buy any equity, but a market of particular stocks. In other words you have to turn into stock picker. Unfortunately, most stock pickers end up with smelly fingers.
The investors who have owned index funds find they have made no money for the past year. In fact the S&P 500 Index is just about where it was 5 years ago. Pretty darn frustrating. Is there any way to make money in the market without raising your blood pressure?
Yes, and it is ideal for the long term trader, but frustrating to those who like to trade all the time. Not only will it make money in the bull market, but it will have you in cash while the bear is decimating everyones stocks. It is a very simple market timing method. You can expect your broker to tell you it wont work, but you can easily prove to him that it does.
On your computer go to www.bigcharts.com and put in the symbol of your mutual fund. Add a 200-day simple moving average with a 5-year time period. Click. If your fund is above the 200 line and the line is ascending keep it. If the line turns down and the price of the fund is below it, sell. Do a historical study on all your funds. You would have been out from the end of 2000 and bought back in about April 2003. Prove this to yourself. Then do it.
Your market frustrations are over.