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I write investment books. I
recommend the following books for you or a good gift to family members, friends
and recent college graduates. They are available from Amazon.com.
The Art of Investing
The Kindle version costs $10. It
is about 700 pages (6*9 each) and covers most topics in investing. The printed
version is $25 and $20 for the Concise Edition.
For more detailed description,
click here or type the
following in your browser.
Profitable investing depends on two factors:
1.
Market timing.
2.
Select stocks with good profit potentials.
They are demonstrated in my book as:
The power of market timing
Detecting
market plunges indicates the exit points and reentry points from 2000 to 9-2013
as follows.
Table:
Vital Dates
|
Market Plunge
|
Peak
|
Bottom
|
Indicator
Exit
|
Indicator
Reenter
|
|
2000
|
08/28/00
|
09/20/02
|
10/01/00
|
06/01/03
|
|
2007
|
10/12/07
|
03/06/09
|
02/01/08
|
09/01/09
|
|
|
|
|
08/01/11
|
11/01/11
|
As of 04/2014, my chart (from
Yahoo!Finance) still indicates to invest fully in the market. Run the simple
chart once a month. When it indicates a potential market plunge is closer, run
the chart once a week.
It is based
on stock prices so it may not identify the peaks and bottoms precisely, but so
far it has never failed to avoid big losses and ensure big gains by reentering
the market. Hope it will give us enough time to act in the next market plunge
as the last two did.
Unbelievable
return with market timing
Calculate how
much you made if you followed the above exit points and reenter points from
2000 to today. I bet you would make a good fortune.
To test the
effect of market timing, I calculated the return of S&P 500 with market
timing and compare it to the return of S&P 500 without market timing from
1-2000 to 9-2013.
There are
many assumptions to make the calculations easier. In general, dividends are not
considered. Compounding is not considered in most cases. The return with market
timing should be substantially better if we buy a contra ETF during exits and
sell it during reentries.
I was shocked
by the incredible return by using simple market timing and the chart tells us
to exit and reenter the market only 3 times from 2000 to 2013.
Summary info:
|
S&P 500
1-2000 to 9-2013
|
With Market Timing
|
Without Market Timing
|
|
Better
|
500%
|
|
|
Gain
|
1,000
|
167
|
|
Gain %
|
68%
|
11%
|
|
Annualized gained
|
5%
|
1%
|
|
Days
|
4,959
|
4,959
|
Calculations:
|
S & P 500
|
With Market Timing
|
Without Market Timing
|
|
1-2000
|
1,4691
|
1,4691
|
|
Exit 10/01/00
|
1,0412
|
1,041
|
|
Enter 06/01/03
|
1,041
|
9644
|
|
Exit 02/01/08
|
1,4893
|
1,3794
|
|
Enter 09/01/09
|
1489
|
1,0205
|
|
Exit 08/01/11
|
1,888
|
1,293
|
|
Enter 11/01/11
|
1,888
|
1,251
|
|
09/03/13
|
2,469
|
1.638
|
|
|
|
|
|
Gained
|
2,469 – 1,469=1,000
|
1,638-1,469=167
|
|
Gain %
|
1000/1469 = 68%
|
167/1469 = 11%
|
|
Annualized gained
|
68% * 365/4959=5%
|
11%*365/4959=1%
|
|
Better
|
(1,000-167)/167 = 500%
|
|
Portfolio
with Market Timing:
1 Both start with S&P 500 of 1,469 on
1-3-2000.
2 10/01/00.
The market timing portfolio exits the market and remains same
value of 1,041 until 6/1/00.
3
02/01/08.
The market timing portfolio exits the market and remains same
value of 1,489 until 9/1/09.
1,489 is calculated as follows:
1,041 * (1 + Rate) = 1,041 * (1 +
1,379-964)/964) = 1,489
where S&P 500 is 964 on 6/1/00 and 1,379
on 2/1/08.
The other calculations are based on S&P 500 is 1,020 on
9/1/9, 1,293 on 8/1/11, 1,251 on 11/1/11 and 1,636 on 9/3/13.
Portfolio without Market Timing:
1
Both starts with S&P 500 of 1,469 on 1-3-2000. We could use the 9/3/13
S&P 500 value, but it will not account on some compounded interest
consideration.
4
S&P 500 is 964 in 6/1/00 and 1,379 on 2/1/08.
5
02/01/08. The portfolio value is calculated to be 1,020 as follows:
1,379 * (1 + Rate) = 1,379 * (1 +
(1020-1379)/1379) = 1,020
where S&P 500 is 1,379 on 2/1/08 and
1,020 on 9/1/09.
The other calculations are based on S&P 500 is 1,293 on
8/1/11, 1,251 on 11/1/11 and 1,636 on 9/3/13.
I cannot
believe the shocking return with market timing. I checked my calculation and there
was nothing wrong but do not hold me on this. Ignoring the compound rate of
return should be minor. If you have time, send me your e-mail address to
pow_tony@yahoo.com, so I can send you the spreadsheet to check out any error.
Even if I
made a mistake somehow and got 100% instead of 500%, it still doubles the
return without market timing! Ask any fund manager what it means to his or her
fund performance and his / her career.
It will
detect the next market plunges, but it may not give us ample of time to react
as the last two did. It will not detect the precise bottoms and peaks as they
depend on the stock price of an ETF representing the market. I have separate
statistics on market peaks and bottoms but they have not been proven. The above
may not work as effectively if there are too many followers. On the contrary it
may work as it could be a self-fulfilling prophesy.
Beat S&P500 by 100%
I recommended 20
stocks in an article Amazing Return in Seeking Alpha, a web site for investors.
If you bought them on the publish date and you would have beaten the S&P500
index by over 100% without considering dividends as demonstrated in my other
article A Tale of Two Portfolios. One of the many techniques is my Pow P/E as
illustrated in another article The Mysteries of P/E.
Say I made a mistake
and it is only 10%. How many fund managers can beat the S&P500 index by
10%?
I write articles to promote my
books at Seeking Alpha, a financial site. If the readers believe Seeking Alpha
is set up as a charity and the writers do not promote themselves and/or their
services, they believe in fairy tales. However, if the promotion asking you to
spend $10 on this book that would potentially earn you thousands or even ‘millions’ in return,
it is a good promotion. We’re bombarded with promotions every day. A wise man
would separate goods ones from bad ones. When we run a business or apply for
jobs, we promote ourselves and/or our products.
With the proven records and great
satisfaction from my readers but not selling many books, I am the worst
salesman. I have most of my investing ideas in this book and you do not need to
buy another book from me today. Treat each of the sections of this book as a
small book that I did published separately.
This book could make you
financially secured for the rest of your life. Gift it to a family member, a
friend and/or a recent college graduate and it will keep on gifting.
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