Apparently, even last year’s market meltdown did not detract some from continuing the most useless discussion of the past few years.

The topic is as to whether ETFs are better than mutual funds. MarketWatch reports as follows in “Actively managed funds lose share to index rivals:”

Mutual fund investors in 2008 yanked more money out of actively managed stock-funds than they put in for only the third time ever, and index-fund rivals took the spoils.

[My emphasis]

And chasing performance is a bad thing, while focusing on asset allocation is a good thing? Leave it up to Morningstar to (again) dispense that much garbage. They still haven’t figured out that those portfolios with fancy asset allocations got killed last year as they did in the bear market of 2000.

For a while now, they’ve been jumping on the ETF bandwagon as if ETFs are the savior of the investment world. Look at the highlighted section again and tell me this: Say, you had invested in mutual funds last year and lost 40.5%, while your “smart” neighbor had selected ETFs and “only” lost 39.1%. Do you think that he’ll be much happier than you are?

Of course not! The question, as I pointed out many times, should not be which one is better, but how you use these tools. There are times when mutual funds outperform ETFs and vice versa. Accept it and live with it. Using both in conjunction with my trend tracking methodology will allow you to select only those that are most suitable at the moment you are deploying assets in the market.

Trying to simply favor one tool over another without a clearly defined exit plan in place will only lead to uncontrollable losses as history has shown over and over again.

Yesterday’s post about my new e-book “The SimpleHedge Strategy” prompted a lot of inquires. Reader Dick had this to say:

Thanks for sharing the Hedging e-Booklet. I think the approach is brilliant, and just whatI needed. I have a question though: You talk of a short-term trend line, but I don’t see itbeing replicated, either at your blog or the Trend Tracker site.

Am I missing something? If it isn’t being currently shown, then my obvious suggestion is that you begin to show it atone/both sites. Another suggestion would be to add a subsection called “hedging” to your other categories that you display (i.e., Domestic Funds, ETFs, Sectors, etc.).

That’s the exact plan. Things were a bit hectic leading up to the completion of this e-book, so I neglected to mention the upcoming additions to the weekly commentary and StatSheet.

First, the weekly update, which now features the positions of the domestic and international Trend Tracking Indexes (TTIs), will as of next week also show the position of the (short-term) Hedge Trend line. This will look as follows and is based on last Friday’s close:

Domestic TTI: -12.28%
International TTI: -20.89%
Hedge TTI: -5.40%

Second, whenever I display a chart of the domestic TTI, it will feature the long-term trend line (red) and the short-term trend line (blue) just as shown in the e-book.

Third, starting with next Thursday’s StatSheet, I will add a section titled “The SimpleHedge,” which will show the latest update on the active position, which I have featured in the book, so you can see how it plays out.

As shown above, the Hedge TTI is currently in negative territory by -5.40%. That means I will hold my existing hedge subject to my sell stop, but will not add any new ones until the short-term trend line has been crossed to the upside.

For about the past year, I have been working on finding a way to improve my trend tracking methodology by researching ways to enter the markets earlier than as per the usual trading rules. At the same time, however, I wanted to be in control of downside risk.

As a result of my research, I am pleased to announce the details in “The SimpleHedge Strategy,” which can be downloaded for free. This e-book was almost completed last June when the markets collapsed, which prompted me to delay the publication. It was too good of an opportunity to apply these adverse market conditions to the SimpleHedge to see if it could withstand the rigors of the market place.

To me, the answer is a resounding “yes,” but you’ll be the judge to see how not only this simple approach can stand on its own but also complements my trend tracking strategy, which I have advocated for over 20 years.

Certainly, this e-book will generate a lot of questions and comments. Feel free to either post them or send me an email. I may not be able to respond directly to all inquiries but will attempt to post the relevant questions along with my answers.

This is a work in progress, and I expect to make updates and revisions as new opportunities present themselves over time.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

The bears continued winning the tug of war against the bulls by a wide margin and the S&P; 500 sank below its previous November low.

Our Trend Tracking Index (TTI) for domestic funds/ETFs remains below its trend line (red) by -12.28% thereby confirming the current bear market trend.



The international index now remains -20.89% below its own trend line, keeping us on the sidelines.

Be sure to tune into tomorrow’s blog post, when I will be introducing a major addition to my Trend Tracking methodology along with a free e-booklet, which I have just completed.

I think reckless bottom fishing should be declared an extreme sport. Many investors, who jumped in too early, based on who knows what reasons, are seeing their portfolio values heading further south—again.

MarketWatch reports “Mutual fund flows back in the black.” Take a look at some highlights:

The mutual fund industry has had little to cheer about, but January’s flow numbers offer a bright spot. Investors put cash to work in all fund types — stock, bond and money-market — reflecting the first positive month for the industry since May.

In December, money-market funds saw net inflows of $127.4 billion, but bond and stock funds both suffered net outflows of $6.7 billion and $27.3 billion.

If I focus on the December data (stock funds), it shows that investors on balance got out of them even as the market was heading north again after the beating it took in November.

In January, everybody was back watching the CNBC cheerleaders and $11.7 billion flowed back into stock funds representing the bottom fishing efforts of the masses. With the continued sharp sell offs in February, more losses have been accumulated in only a few weeks.

Buy-and-hold and bottom fishing investors are being eaten alive as this bear market deepens. To be clear, I absolutely get no pleasure out of seeing so many investors doing the wrong things.

On one hand, I am delighted that trend tracking has helped thousands of people get out of the market in a timely manner; on the other hand, I am saddened that I was not able to spread the word more and help those tens of millions of people who sat on the deckchairs of the Titanic and watched without a clue as to what was about to happen.

Again, I am asking you, if you like my blog and weekly newsletter, to spread the word to as many people as you can; those investor who are helped because of your efforts will be forever thankful.