No Load Fund/ETF Investing: A ‘Late’ Buy Signal

Ulli Uncategorized 2 Comments

A few days ago, MarketWatch had a story featuring the editor of the Mutual Fund Strategist Newsletter, Holly Hooper-Fournier, saying that 16 of the firms 17 timing models are “currently issuing a buy signal.”

She further noted that, unlike some timing models, the ones used by her firm remain bullish on international and emerging markets investments.

Hmm; I find it hard to believe that any model would issue a buy signal at this juncture in the market given the run up we’ve had over the past 10 months. While I don’t speculate on future market direction, I think that, looking at the big picture, we are closer to a market top then a market bottom.

The danger is that the investing public (who reads stories like this) looking for a point to enter the market, might be tempted to throw caution to the wind and put all available investment dollars to work at once.

A smarter way would be to use my incremental buying process and only expose one third of the total portfolio at first and, upon a 5% gain, commit another one third increment and so on. This will help avoid to possibly buying in at the top of the market and, when used together with my recommended sell stops, will reduce the risk tremendously.

Just because a newsletter you follow issues a buy signal does not mean you have to jump in 100%. Commit a portion you are comfortable with and, if things go your way, add more. You’ll definitely sleep better at night.

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Comments 2

  1. Can your incremental buying process be rephrased as the following?
    1. invest 33% at first
    2. invest the rest (67%) in a 5% pace.

    Thanks,

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