ISA Investing and How to Protect Your Gains – Part 1 of 2
By Stephen Sutherland, author of Liquid Millionaire.Posted in the Category of ISAS, Investing, Stock Market, Investment Fund, Wealth Building on 7th October, 2009.
Tags: bear market, bull market, gains, isa, isa investing, isa portfolio, market direction.
How ISA Investing Can Help You Protect Your Gains in a Downturn
Back on September 12th I began a series of blogs looking at the importance of determining market direction when it came to ISA investing.
Since then I have focused on the positive and how, in the current market conditions it has been possible for me to make returns of as much as 67.8% on my ISA portfolio.
But what happens when the market takes a dramatic downturn? Is it possible to make money in a healthy (bull) market and protect those gains in an unhealthy (bear) market?
Today, in the first of a two part series, I want to show you how you can protect the profits on your stocks and shares ISAs in times of economic downturn.
Know More about How the Market Works Than 95% of Independent Financial Advisors
If you have read my last few blogs you now know more about how the market works than 95% of accountants, bank managers, stock brokers, financial advisers and stock market investors.
That is why so many people find the information in my book Liquid Millionaire so valuable, especially when they use it to profit.
But does reading the market in this way really work?
And does it work in both bullish (up) and bearish (down) market environments?
As I have said before, the timing system that I use is not flawless but it does tend to get it right about 80-90% of the time. As you are probably aware, it helped me to correctly time the beginning and the end of the 2003-2007 bull market.
I have talked quite a bit previously about how timing the upside has paid off for me and my clients at ISACO, but what about the downside?
A System That Helps Protect and Preserve Your Profits
As a rule, most people are interested in how they can make money in the stock market, but many of my clients are just as interested in protecting their wealth. After all, many of them come to us when they have already built up quite substantial cash holdings. Many of my clients were pretty pleased with themselves in 2004.
Aiming to Beat the Nasdaq
The system that my clients and I use has a goal of beating the Nasdaq. And in 2004, the Nasdaq closed the year up 8.6% whereas the system we use closed the year up 32.5%. But the one thing that really impressed my clients the most with regards to that 32.5% one year gain was the fact that during 2004, the Nasdaq had a massive 19% correction. And yet our system still managed to avoid it and score such a healthy gain.
Another example of our system being able to accurately time the market on the downside came in early 2007. As I have said previously, the timing system I use will not get you out right at the market peak nor will it get you in right at the bottom.
And as American financier and stock market speculator Bernard Baruch famously said, “Don’t try to buy at the bottom or sell at the top. This can’t be done–except by liars.”
On 28th February 2007, my clients and I exited the market. The market was showing definite signs that something was wrong.
The market was telling me that the trend had changed from an uptrend to a downtrend. Because of this change, we were forced to switch our tax-free holdings into the safety of a cash based fund. After switching out, the market then proceeded to go lower but eventually started to rebound. Over the next 8 months, the market saw rises on low volume (indicating a lack of demand) followed by falls on heavy volume (indicating professional selling) further confirming all was not well. This action kept me, my brother, our team and our clients out of the market because it was clear to me that it was not safe to invest.
In Part 2 of this series I will examine in more detail what can happen if you fail to exit the market in times of downturn and I will also be sharing some more invaluable tips in how to read the market like a pro.
In the mean time, if you would like to find out more about how you can make unbeatable gains using ISAs when the market is healthy and protect those gains when it is not then please click here for a FREE sneak preview of my book Liquid Millionaire.
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.
We endeavour to deliver quality information, ideas and personal opinions on stocks, funds and the general market. However, the information, ideas and personal opinions provided are intended to be a general guide to financial management only. Our products are intended to be a general guide to financial management. ISACO Limited and its employees are not agents, brokers, stockbrokers, broker dealers or registered financial advisors. ISACO Limited do not accept any responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in its products. ISACO Limited does not recommend particular stocks or investment funds or any other security or any other investment of any kind. If particular stocks or investment funds are mentioned, they are mentioned only for illustrative and educational purposes. Whilst ISACO Limited comments on the services and advice offered by other companies and individuals, none of the companies or individuals have authorised, sponsored, endorsed or approved this publication. ISACO Limited has not received any remuneration in return for including any company or product featured in our products. You should seek advice from a registered financial professional prior to implementing any investment program or financial plan. ISACO Limited, their agents and employees, do not guarantee any results or investment returns based on the information in this program. Past performance is no indication or guarantee of future results and the value of any investment you make can go down as well as up. The products present information and opinions believed to be reliable, but the accuracy cannot be guaranteed and ISACO Limited is not responsible for any errors or omissions. ISACO Limited accept no liability for such inaccurate or incomplete information.
