Let’s say I said there is a method to improve your funds versus your peers. Will you be interested? Based on a November 2009 survey of high internet worth investors by Investment News, 99% of wealthy individuals and almost 90% of mega-millionaires felt their finances are somewhat worse or much worse than their peers.
Now why would this function as the situation? One answer one thinks of, the incorrect method of their investments. It had been too easy throughout the 1980s and 1990s to employ a good investment consultant or manager and obtain market like returns with little downside volatility. However, once we joined the 21st century something altered, we joined a secular bear market.
Secular bear financial markets are periods of effective volatility of return and little upward cost movement outdoors of a big buying and selling range. Such periods last between 17-twenty five years typically. Here’s what has happened in recent such periods throughout the economy:
Market Period – Annual Return
2000-Present
-4.68%
1966-1982
.83%
1929-1953
1.69%
1906-1924
-4.29%
The only method to earn money in secular bear market periods would be to trade the big up and lower swings from the market. Buying and holding securities just doesn’t work in this kind of market.
We feel that’s where “trend following” shines. Trend following strategies create predict market or stock movements, rather they capitalizes around the market’s movements wherever or every time they occur. Trend supporters respond to what’s happening instead of anticipating what could happen.
So what exactly is a pattern? A pattern is really a strong, sustained move that may last from the 3 days to several years. Typically a pattern is one thing we have seen everyday that means ongoing cost relocate the stock markets. A good example will be the rising dominance of the country or region around the globe that means a lengthy and sustained upward relocate stocks from that country.
The aim of the popularity follower would be to let a brand new trend develop after which invest with this trend. The popularity follower then holds that position until there’s a reversal. Trend following is dependant on the idea that there’s always a pattern materializing somewhere on the market. The popularity can result in a powerful move greater (or lower) in cost. When the investor can find out the trend and get on the bandwagon, they’ll earn money.
The smart trend follower doesn’t invest in the exact bottom while heOrshe would like confirmation that the turn (reversal) has happened. Likewise the popularity follower will normally not sell in the exact top (that is easier identified afterwards). They offer following a clearly identified alternation in trend (reversal). Therefore, the popularity follower has the capacity to capture the “meat” from the trend.
Another essential point would be that the trend follower is indifferent whether the popularity goes up or lower to capture his/her return…as lengthy as there’s a pattern they are able to earn money. This latter statement is essential, the popularity follower is agnostic regarding the direction from the trend to allow them to earn money or at best safeguard capital in lower markets. This provides the popularity following investor a benefit over their peers and improves their finances.
So if you wish to improve your funds, on the relative or absolute basis, versus your peers, trend following might be the solution.
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