One of the biggest unspoken concerns that investors have is avoiding another 2008. Throw that one in there with “how to know your advisor isn’t Bernie Madoff” and “how to not miss a big market run-up” and you’ve covered the “trifecta”. In this week’s Mullooly Asset Management podcast, Tom and Brendan discuss how investors could have side-stepped some damage in 2008. They explain how employing a tactical game plan might have minimized some of the losses many experienced.
The tactical game plan here at Mullooly Asset Management revolves around our use of point and figure technical analysis. These charts (provided by Dorsey, Wright and Associates) provide us with critical information we use to manage money for our clients. We use short, intermediate, and long term indicators to build an investing blueprint.
Short term indicators give us an idea of when we should be making investments. To put it plainly, they offer entry/exit points in the market. When it comes to the short term indicators, we would rather be investing when they’re pulling back (not over-bought).
Intermediate term indicators tell us how bullish or aggressive to be. They let us know when to be actively investing. This tends to be when markets are generating more buy signals than sell signals, signifying more money is moving into the markets. When this scenario occurs, you’ll often hear us referring to it as being “on offense”.
The long term indicators mean precisely what you’d expect. They show us long term market trends. One thing that our long term indicators can show us is when it may be preferable to have money in cash instead of the stock market.
Now that you understand the underlying basis of having a tactical game plan, we can get back to trying to avoid another 2008! Tom and Brendan go through the short, intermediate, and long term indicators as they were in late 2007 through 2008. While Wall Street was still bullish in early 2008, our indicators were showing negative signs.
We certainly aren’t saying that these indicators are a magical crystal ball that tells us when financial disasters are going to occur. However, utilizing them may have helped investors minimize their losses during 2008. The problem is that so many investors are into other concepts like buy and hold and asset allocation. They were strapped in for the ride in 2008, and it was an unpleasant one for most.
Tune into this week’s Mullooly Asset Management podcast to hear what our indicators were telling us in 2008, and to learn how having a tactical investing plan can go a long way in trying to avoid another 2008.