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Just because a particular segment of the market is doing well, we should not just act blindly. You should always look to improve your 401(k) account, or other retirement accounts. If (for example) large cap funds happen to be doing well, it is not enough to simply buy ANY large cap mutual fund for your 401(k) or 403b annuity. What we do at Mullooly Asset Management is find the funds that display positive trends, along with good relative strength.

New York State Deferred Compensation

As an example, in the New York State Deferred Compensation plan, there are 33 mutual funds to choose from:

22 of these funds are large cap funds
11 of the 22 are on relative strength buy signals as of February 24, 2012.
Only ONE of the 11 funds is actually moving UP on its’ relative strength chart in a column of X’s.

So, out of eleven possible choices, there is only one clear winner, which we discuss on the podcast.

Why is this important?
Based on the data from Dorsey Wright & Associates, this one fund is up over eight percent in the previous thirty days, while all the other funds in the peer group were up — but only up between two percent and five percent.

Charts with relative strength BUY signals tend to outperform the markets (but not always) on the way up, and these charts also tend to (again, but not always!) pull-back a little less than their peers.

This becomes VERY important when we expect markets to pull back (as we are expecting in late February 2012). I would also add the following:

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be profitable or equal to past performance levels.

All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions, or withdrawals may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for an investor’s portfolio.

If you are relying on a blog post for specific investment advice, you are making a huge mistake. Please speak with an investment adviser before making ANY investment decisions.

If you do not have an investment adviser, we encourage you to contact Mullooly Asset Management at 732-223-9000, or through our website. Under no circumstances should the content discussed here to be considered specific investment advice.