Investing with the Trend: A Rules-based Approach to Money Management

Preface

During tough times in the market, the individual investor is not well served by following the buy-and-hold mentality promulgated by the financial institutions, most mutual funds, and brokerage houses since the early 1950s. The “world of finance” and “Wall Street” have set the stage for investing for the long term in their effort to market themselves and sell investing ideas to an unsuspecting and financially uneducated public. With their big emphasis on diversification and its long-term protection, their confusion between buy and hold and buy and hope, the misinformation continues to pour out of the financial institutions.

Corporate pension plans are being dumped, social security is in the tank, and our financial system is in the midst of a giant restructuring because the stability of the past two decades in the last century has caused prudence, and what used to be called common sense, to be set aside for greater leverage and higher risk. Retirees as well as younger investors are learning the hard way that “investing for the long term” has periods where the performance is poor and that those periods can last a decade or much longer.

My decades of experience have taught me that there are times when one should not participate in the markets and are much better off preserving capital because bear markets can set you back for a long time, and they are especially bad when they happen in your later years. Keep in mind that the closer you get to actually needing your serious ...