If your 401k has not gone anywhere over last 10 or 15 years then you should look closely at your approach to investing.
Lot of approaches used for investing in 401k suffer from negative compounding as they remain fully invested during market downturns.
If you are motivated to avoid that kind of negative compounding effect then you should look at buying mutual funds on extreme breadth weakness and sell on extreme breadth strength.
Buying when there is extreme breadth weakness on Index , ETF or mutual funds (which are composite of number of stocks) works but it may not work on individual stock. Individual stock might go out of business but composite have rotating roster of stocks.
The mutual funds recover from weakness as they replace laggard stocks with new stocks. The best money can be made i n 401k if you buy when breadth measures are at extremes. Those are the zones from which markets and mutual funds start moving up . As a result you benefit from very good entry.
If you are motivated to avoid that kind of negative compounding effect then you should look at buying mutual funds on extreme breadth weakness and sell on extreme breadth strength.
Buying when there is extreme breadth weakness on Index , ETF or mutual funds (which are composite of number of stocks) works but it may not work on individual stock. Individual stock might go out of business but composite have rotating roster of stocks.
The mutual funds recover from weakness as they replace laggard stocks with new stocks. The best money can be made i n 401k if you buy when breadth measures are at extremes. Those are the zones from which markets and mutual funds start moving up . As a result you benefit from very good entry.
If you remain in market through correction even though your funds will bounce back due to compounding effect you would still be down and missing on new gains.
Best time to buy is when market corrects 8% plus and then market breadth becomes extremely negative.
Best time to buy is when market corrects 8% plus and then market breadth becomes extremely negative.
To do this you need to develop skills . This is not for everyone. You have to understand market breadth and need to develop a setup to identify extreme weakness and strength. Ordinary investors do not have aptitude and skills to do that . But if you are motivated you can do this and get much much better results.
the Stockbee Lemonade Strategy uses that kind of approach. Stockbee 401K Lemonade Strategy main points are:
Become bullish once market has 8% plus correction from high and reaches extreme bearish zone on Market Monitor or other breadth measures like T2108 or $BPNYA
Rallies that start from such extreme oversold levels are signaled by series big breadth days of 500 plus on Market Monitor.
This intense buying in short time period leads to a Breadth flip. Breadth flip is signaled by breadth ratio of 5 and 10 days flipping from negative to positive in very short time period.
Breadth flip results in Market Monitor Primary indicator turns positive after being negative and reaching extreme negative breadth.
Time to get fully invested at this stage in 401k.
The fund to get invested is selected based on Trend Intensity of 42 days (TI42) or historical beta of funds . Highest ranked funds are selected. During the length of the bull move the objective is to be in Top 3 ranked funds by TI42
Ideally it is best to be invested in just 1 top ranked fund.
Remain in fund as long as it continues to be in Top 3
At some stage the MM Primary indicator or T2108 or $BPNYA bullish breadth readings will reach extreme. Look at exit at this stage or protect open profit aggressively.
Objective is to as far as avoid down periods and get invested near bull market bottom.
Compounding works very well if you do not have negative returns period.
2 comments:
Hi Pradeep,
Thank you for posting this strategy. Does the TI42 formula still work on TC2000?
yes
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