Determine Market Direction to Make Index-Beating Gains – Part 1 of 3
By Stephen Sutherland, author of Liquid Millionaire.Posted in the Category of ISAS, SIPPS, Investing, Stock Market, Investment Fund, Wealth Building on 12th September, 2009.
Tags: index beating gains, isa, isa trend investing, market direction.
How Determining Market Direction Helped Create 67.8% Gain
In my previous blog I spoke about my recent ten month gain of 67.8% and how a brand new form of investing – ISA Trend Investing – has enabled me to achieve this index beating performance.
When people hear about such a decent gain in a relatively short period of time, the first thing they want to know is exactly how I did it so that they can do the same.
Over the next few weeks, I’m going to be explaining exactly how to make such a gain so that in the right market environments, you’ll also be able to make similar – if not even better gains.
Today I would like to focus on the first in the 3 simple steps to ISA Trend Investing – How to Determine Market Direction.
The 3 Steps to ISA Trend Investing
ISA TREND INVESTING has 3 Simple Steps:
Step 1 - Determine Market Direction
Step 2 - Find a Quality Fund
Step 3 - Time Buys and Exits
These three steps are the key elements in my making a 67.8%, 10 month return.
By using this blog to focus on each step individually I hope to show you exactly how it could be possible for you to make similar gains – or even better!
I’ll start by explaining in this 3 part series how to read the market like a pro –and why it is so important to be able to determine future market direction.
Once you understand how the market works and why you must get in sync with the market’s trend, we can then move onto learning how to find the highest quality investment funds.
And we’ll finish on timing your buys and timing your exits.
Step 1 –Determine Market Direction
You can choose the best investment fund in the world but if you invest in it and you are wrong about the trend of the market, your portfolio is going to suffer. This happened to thousands of uninformed people in the great bear market of 2000-2002 and in the last bear market that started in 2007 and ended in March 2009.
With ISA Trend Investing, getting your timing right is crucial. Many people mistakenly think that it is all about choosing the best investment fund to park your money in. Whilst finding a high quality fund is important, it’s not as important as getting in sync with the market’s trend. As a reminder, here is what I mentioned last time about how timing the market fits in with this new approach to ISA investing.
“Instead of simply buying and holding, you are active. By understanding the overall trend or direction of the market, you invest into the market when the confirmation of the trend is up, and switch out of the market when the confirmation of the trend is down. This is the most important element in ISA Trend Investing.
This first difference is the one that will lead you to either success if you get it right or failure if you get it wrong. Even if you find the best investment fund on the planet, if your trend reading is wrong, meaning your timing is wrong, you will fail.”
Therefore in your analytical toolkit, you absolutely must have a reliable method to determine future market direction. And if your desire is to become proficient, it is going to take time and patience. Throughout your journey to tax-free riches, you will ideally need to know if you are in a bull (up) market or are you in a bear (down) market.
Key Questions You Have to Ask
But that is not enough. If we are in a bull market, are we in the early stage or the later stage? And more importantly what is the market doing right now? Is it weak and acting badly, or is it merely going through a normal decline (typically 8% to 12%)? This means to win with ISA Trend Investing, you absolutely have to know the state of health that the market is in. Is it healthy (uptrend) meaning it is safe to invest or is it unhealthy (downtrend) meaning you should be out on the sidelines in the safety of cash?
Next time I’m going to show you the best way to determine the overall trend and direction of the market, but if in the mean time you have any questions about how ISA Trend Investing could help you to retire rich then please contact a member of my team for a chat. As always you have my word that there will be no sales, no jargon, just the facts.
Your friend,
Stephen Sutherland
The UK’s Leading Authority in ISA Trend Investing and Author of Liquid Millionaire
Please Note: As always, let me remind you that I am not a financial adviser and therefore not authorised to give advice on what investments to buy or sell.
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