All About Market Timing – A Great Christmas Read

Here is the second book I recommend people read to educate themselves on the stock markets. “All About Market Timing” was written by Leslie N. Masonson and published in 2004, after the 2000-2003 bear market. Click in the title above to go toYou Can Time the Market the Google Books site to see the contents of this great book in detail.

In the introduction Mr Masonson says of the people who got hurt in the 2000-2003 crash,

“Perhaps you followed the widely touted buy-and-hold approach. And if you are like most investors, you have no game plan for cutting your losses or taking your profits. Lacking investing strategy and blindly following the buy-and-hold approach can lead to financial ruin.”

I don’t think I need to dwell on the point in this market.

What you need to do is make sure you don’t let it happen to you again. You also need to learn how to minimize what is going on now with your portfolio.

This book will help you understand how to gauge the markets and when might be a good time to get into the markets. There are no guarantees. You need to think in terms of probabilities and the information in this book will help you do that.

There are 10 Indicators Mr Masonson discusses in the book that should be used to help you determine the market direction.

One that is very topical right now is the VIX Index, otherwise known as the “Fear Index”. The higher the value the more scaredVIX Index showing it reached 90 in October 2008 the investors are. If you look at the chart  courtesy of you will see it reached 90 in late October 2008.

Just to put that in perspective it only reached 50 in 2002 🙁

On Pages 73 and 74 there is a table of all 10 indicators including their key numbers and where you can access them on the Internet.

So if you take a little time you can add these to your favorites in your Internet Browser and check them. This will put you in the drivers seat when you talk with your financial planner about when you should increase or decrease your equity positions.

One problem many people face is the massive pressure to maintain a buy-and-hold approach. This is vital for financial well-being of the wealth management industry. They need you to leave your money with them so they can time the market behind closed doors in their efforts to maximise returns.

You do not want to time the market to maximise returns. You want to time the markets to avoid large losses (Rule #1) and preserve your capital. As such you will use the indicators to help determine the best time to enter and exit the markets.

If you are investing through a fund manager you cannot use Stop Losses to exit your positions. But you can use the 10 indicators to help you determine when it might be wise to wind down your equity positions and reduce your exposure to risk of large losses.

That’s when you call your financial planner and plan an orderly exit from the equity funds in your portfolio into fixed interest or cash. Don’t even think of waiting until your scheduled meeting with them. You should have plenty of time because everyone else will be using the buy-and-hold approach and be running with the herd towards the bear market cliff!

These indicators can help you get control of your nest egg but still leave with a financial planner to manage for you.

So treat yourself or ask to get “All About Market Timing” for Christmas. With the way the economy is you should have plenty of time to read it.

I’d like to thank everyone for subscribing to my blog and for reading my posts. I hope it has helped you realise how important it is to control your nest egg yourself.

Merry Christmas and I wish you all a much better 2009.

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