Stay Connected:

Do you know the first lesson in investing ?

I learned it in 1965. I used to go to the Boardroom at Merrill Lynch in Boston during my lunch hour to watch the market. I was just learning about investing at the time. Every day I would see this young man sitting there. One day I sat next to him and asked him if he worked in the area. He told me he didn’t work but was a trader. He said he went to the financial library every morning and spent his entire day watching the market. I told him I was just learning about investing and he asked me if I had learned the first lesson in investing. So I asked him what it was. He said it was learning to take a loss. I told him that I had taken losses. He then said, “But have you learned to deliberately take a loss. When you make an investment that is not going the way you thought it would do you sell it and take the loss.” I have never forgotten that lesson.

Why am I talking about taking a loss?

Taking a loss at the right time may be the best decision anyone can make. We tend to stay with a losing investment and hope that it will go back up. Sometimes we wait too long and say, “Well, I can’t sell now so I will just wait until it gets back up to what I paid for it and then Sell.” Well maybe it will take a long time or never get back to what we paid for it.

I am sure you know the second lesson in investing. Which is when you are invested in something that is going up the way you expected, ride it all the way up. Many people make an excellent investment and get excited when it goes up 10% and sell it. Well maybe they should continue to hold it.

But then, how do you know how long to hold it. That’s where good Market Timing comes in. I say that you shouldn’t try to guess where the top will be before it gets there. Try to identify the point where the investment has gone past the top and is starting down. With good investments this usually happens when the market itself turns down. That’s when my Signals become very valuable.

But people say, “I am in the market for the long term.” Nothing wrong with that concept, but personally I hate to see my investments take a big hit like the one that occurred in October 1987 when the value of portfolios took a 25% drop in one day. Or in the summer of 1998 when they went down 25% in a few weeks. My clients avoided those drops and were able to repurchase the same mutual funds at much lower prices. In fact we have avoided every Major Drop in the market since I started selling my service in 1978. Just luck? No-excellent Market Timing.

A prolonged up market can outperform Market Timing.

This is a true statement, and if you made some comparisons you might find that you would have been better off just staying in the market. But remember this is hindsight. And the Market Timers smile more and outperform the buy and hold crowd because the market does take big drops now and then. The Timers get out early and repurchase when the prices are much lower. They sleep well, and you can’t put a price tag on that.

It’s impossible to get in at the exact bottom or out at the exact top. Seems like everyone is looking for the expert who can look into the future and tell them when the top or bottom is coming. If you haven’t figured that one out yet, let me be the first to tell you that person does not exist. Oh you hear it everyday on the financial programs.

“So and so’ says this market is going up for the next six months and the Dow will go up 2000 points”. Or “this market is going to crash like it did in 1929 and you better get out now and stock up on dried beans”. I won’t give these people the benefit on naming them, but I bet you can name a few. For some reason I can’t seem to be able to look into the future, but I can mathematically identify changes in the direction of the stock market after they have started and close enough to the Tops and Bottoms to make the Signals very valuable.

Are my Signals Perfect?

Of course not. But over the last 40 years, 4 out of 5 trades have yielded positive results. We occasionally get whipsawed and take small losses.

That’s the key, we take small losses. The gains, however, are sometimes very large, because we stay with the up trend for as long as it runs. To be a good market timer you have to be able to control your emotions. You have to believe and rely on the timing system and not say to yourself, this is the wrong time to get in or get out. If the Timing System is good and has a long proven track record, like mine, you have to be able to go with it and not get excited about the daily market fluctuations. You have to stop thinking “Gee, I should have gotten in or out last week.” Because last week you didn’t feel that way and only hindsight gives you that 20/20 vision this week.

Do you find it difficult to make investment decisions? Do you have difficulty deciding when to get in or out of an investment? I will tell when to pull the trigger, and if you follow my Signals you will know the right time. I will watch the market for you every day. Just think, if I give you a Signal that turns out to be not profitable, you have someone to blame beside yourself.

Do you have someone to consult with? If you become one of my clients you will be able to consult with me at any time, and it’s included in my $395 annual fee. Try to find a Registered Investment Advisor who will provide you with Market Timing Signals and unlimited free consultations.

Go With The Trend. Don’t Let Your View Of Where You Think The Market Should Go, Rob You Of The Opportunity To Profit From The Market Trend.

You may take some satisfaction in knowing that I use this investment approach and have a personal interest in making sure that it works. You are welcome to trade along with me.

James O. Rohrbach


Subscribe to Investment Models