Patience, Proper Money Management & Back into Foreign Currencies
Principles of the Stock Market

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Have You Seen This?

 PORTFOLIO STRATEGY:  Written Monday, May 19th, 2008

 Patience and proper money management.  Let me preach and suggest both kicking off a new week, halfway through the “Sell in May & Go Away” month.  Yale and Jeffrey Hirsch’s STOCK MARKET ALMANAC promulgates this six months in and six months out yearly strategy but has been refining this approach in recent years by suggesting investors don’t abandon stocks UNTIL the MACD line, a well known trend following indicator breaks down, which it hasn’t yet.  So I’d preach patience.  Stay with this stock market until this rally ends, likely by this time next month.  Stay in those sectors performing the best, like energy and related, transports and technology.  As to proper money management, I’d also suggest being “long,” being invested, roughly 50% to 70%.  The percentage depends on your investment objectives, your Big Picture view and your personality.  If you’re truly investing long term, say you’re young or you sleep fine when your statement says you just lost -10% over the previous quarter, then be in there 70%.  Keeping the remaining 30% if the market keeps sinking; one always needs funds to “buy on sale.”  But if you’re slightly older, you track your portfolio frequently, or you’re cautious by nature, be in there 50%. 


Finally, I want to suggest going back to nibbling on dollar alternative investments, namely buying foreign currency ETFs, a bit at this stage.  We’ve just had a dollar rally, as minimal as its been.  This has caused the Swiss franc and Japanese yen to fall back.  Yes, the US dollar rally could continue to rally but a look at the chart of the franc and yen show both have pulled back to logical buying points.  Both are still in longer term uptrends, have corrected and have built possible bases.  Thus let me recommend putting a toe back in the water in both FXF (Swiss  franc ETF) and FXY (Japanese yen ETF). 


Disclaimer!  I bought a tiny bit of FXY late  Friday.  I hold no FXF but may buy anytime. 


*  If  the buck starts dropping once more, next I’ll suggest going back into the soft “AG” ETFs.  We’ll see.



Posted 05-20-2008 1:07 PM by Richard Schwartz