A Conservative Fund Trading System 8/29/14

Which funds are rising under the radar and propping up your portfolio? A quite unexpected group I might add. Bond funds are the answer.  The media is focused on the Dow Jones 30 but no one talks about bond funds usually.

Look at charts on AGG and TLT bond funds. Both are clearly rising with entry signals and multiple chances to get in. Make a modest amount of money and get out. In fact it gives me a great idea for conservative investors that might go against the grain of the diversification advice of portfolio managers. Let us say you are over 55 and want to make money in the stock markets and don’t want to take high risk. How can you invest in bond funds and do that? Aren’t interest rates supposed to be rising and bond funds crashing according to the pundits? Yes… that too could happen so I will not rule it out. A simple timing system could enable making money as bond funds go up or down.

What if I took a larger portion of my portfolio and bought bond funds using a timing system? Yes – it would certainly work but don’t expect huge returns like with individual stocks. What could I do if the markets were to drop these bond funds – lets say interest rates were rising and bond funds were dropping. Well the answer is to put money into a fund like TBF. This is the Pro Shares Inverse Bond fund. The charts below will show it has been dropping steadily as bond funds have been climbing.

Yes – One could trade just bond funds using a timing system and have a modest income without taking all the risks that go with individual stocks in the stock markets. For example one could enter half at a primary entry signal and bring in the remaining half to be invested at the secondary entry signal and exit half at the secondary exit signal. This system would work in an up or down bond market using TLT, AGG and conversely TBF.

Below are the charts to show what I mean…but yes yes… the future will not be identical to the past and one would still be susceptible to a rapid one day 8-9% sell off against the trend… there is always risk in everything we do.

401K Monthly Analysis – Still in Stocks? 8/3/14

In my monthly 401K analysis, I select which funds I should be in every month. My first decision to participate in my 401K is based on whether S&P500 (SPY) is up or down. I will not participate if it bears down as the market typically takes everything down with it. As such, SPY has an exit signal and is pointed down. I have already pared down on my 401K. I am still holding on to some funds that require longer hold times otherwise I pay high redemption fees.

In my current employer’s 401K funds the top funds are WFA SPL Midcap VL, and Fidelity Equity fund.

In my previous employer’s 401K funds the top choices are Lazard Emerging Market and Cohen & Steers Realty. I still have positions in those and have purchased put options on SPY to start taking some downside protection. The chart on LZEMX has a short term down arrow. I would not enter this fund at this time.

The SPY chart posted earlier on Friday shows an exit long; but the moving averages are still in very stable territory and it is likely that short term weaknesses may change later to another upward move. Still, I will plan on getting out of these funds on a bounce.