Investing in the market when done correctly is the best way to increase your wealth for retirement. If you were a baby boomer and invested 10k in the Dow 30 with dividends reinvested around 1975, your investment at time of retirement 2010, would be around $75,651. A grand total of 750% return.
If you are a generation Xer and invested 10k in the Dow 30 at 2005 with dividends reinvested, your investment as of 11/28/2018 would be around $26,292.92. A total return of 260%.
If you were a millennial that invested in the Dow 30 with dividends reinvested around 2010, your investment as of 11/28/2018 would be around $20,805.19. A total return of 208%.
Investing doesn't need to be complicated. You just need to develop a strong core, make sure dividends are reinvested and let compounding interest, as well as historical facts, work it's magic. What are historical facts?
The Dow, NASDAQ, S&P 500, and Russell 2000 all pull back then go higher. Then pulls back and goes higher again, and so on. It's a trend that has yet to be broken. Don't believe me? Let's take a look.
Numbers don't lie. This brings me to what most investors core should be. The Tickers are QQQ (Nasdaq 100), DIA (Dow 30), SPY (S&P 500), and VTWO (Russell 2000). Your core, which should be for long term grown, doesn't need to have any more tickers. The ETF's are designed to track the indexes and have low expense ratio.
Every month or year, if you can, you should add money to your core, just watch compounding interest and market growth work it's magic. By the time you retire, you will have a nice chunk of change. I have done the work for you. Simply invest in the motif below. If anything changes, I will update the motif as needed and you will get updates.
Market pull backs are going to happen. It's an opportunity to buy but for many, it's also a time of panic. If you are one that can panic easily, then let's talk about a balance portfolio. To balance your portfolio, you will take half of your money and invest it in the Core and half in Bonds.
Bonds are steady. They don't have much volatility if you pick the right motif. When there is a pull back, your portfolio will not take a major hit because half is in bonds. Thus less of a panic.
Make sure dividends are reinvested and even if you are not a person that panics easily, balancing your portfolio is never a bad idea. 50% in core and 50% in bonds. You can re-balance once a year to ensure it's a 50/50 split.
Every time you add money to your portfolio, it should be divided equally between your Core motif and Bond Motif. A motif that goes well with the Core Motif is Bonds Diversified. Having just these two motifs creates a balance portfolio.
Bonds Diversified.
How do you fund your core? You can use Microsavings Apps like Acorns or Digit. It's not a bad idea to use these apps to help budget and save your money. Rule of thumb is, bare minimum, 10% of your paycheck should be moved into your investment account. However, there is another way I fund my core besides using said apps, I speculate. I don't speculate my entire sum of money, that's in my core, but a small portion of my portfolio is for speculation to help fund my retirement (core).
Let's take a look at some motifs I use to speculate during a bull market.
Dow 30 Bull
S&P 500 Bull
NASDAQ Bull
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Russell 2000 Bull
These motifs are designed for anyone who has $250+ dollars and wants to start speculating the market. We are not going to day-trade but we are going to try to beat the market to help us get money to fund our core. The one thing you need to remember when speculating, the market will give you many opportunities to take your profits and run. If you are disciplined, you will do okay, but if you are greedy, you will get slaughtered.
Let's take a look at DOW 30 Bull. The first year I started to speculate the Dow using my motif was 8/3/2015. It was horrible. In twenty two days I was down 18%. On October 28, 2015, I sold my entire position and walked away with a whopping 1.5% profit. Everyone was making a butt-load of money in Cryptos and I made a meager 1.5%.
The green line represents the S&P 500. The blue line is my Motif. The green circle is where I got out.
I was determined to get this to work and went at it again the following year. Let's take a look. It was better, I was only down 14% by February 11th. Then by April 20th I was up by 10%. I was thrilled. 10% was what I wanted to do for the year. I liquidated the entire position and was jumping with joy. The motif went on to make 32.2% for the year without my money in it. Of course. Naturally that would happen.
I learned being persistent and timing is everything. 2017 was going to be my year. This was a good year. It was a steady climb. Four times I had opportunities to take profits off the table as represented in blue circles or just liquidated the entire potion. My exit point was on December 12th. Profit for the year, 50%. Not bad if you ask me.
The blue circles represent exit points or at least, you should be taking profits off the table.
2018, that's been a roll coaster year. Started out amazing and soon it was keeping me up at night. By September 20th, I took my 10% and ran. I was ready to get out.
As I said, the following motifs above are meant to be used for speculation. I usually take half my profits and keep in cash to pay taxes and use the other half to add to my core portfolio.
The great thing about investing in the motifs I made. I do all the work and you get the notifications. All you need to figure out, is your exit strategy, when it comes to speculating. Let's look at some more charts to understand exit strategy.
S&P 500 Bull
Once again, the blue line represents the performance of my motif. The green line represents the S&P 500. The blue circles represent exit points or at least taking profits off the table. The green circle represents where I got out and the red circles represents where you should start to panic and exit. Black circles represent other exit points if you missed the first one.
2017
2016 S&P 500 Bull Motif. Black circles represent other exit points.
NASDAQ 100 Bull 2017
NASDAQ 100 Bull 2016
Russell 2000 Bull 2017
Russell 2000 Bull 2016
If you noticed, as time went on, I tried to stay in as long as possible. Let the motifs run their course. For the most part it did me well but on some occasions not so much. I also panic after large dips and usually sell at the upswing. I always try to protect my profits because that's what funds my core. The biggest take away from all the data above is the market gives you many opportunities to take profits off the table or exit completely.
The reason I don't stay in the motifs I use for speculating for the long haul is because it's not what I designed them for. I use them just to increase my capital to fund my core. To sell within a 12 month span and grow my wealth.
What to do when the market goes bear? I take it as an opportunity to invest more money into my retirement account (core). However, when it comes to speculating, my strategy changes a little bit. I will start speculating inverse ETFs. But, because the following motifs listed below are so volatile, I will have 25k sitting in my account to avoid unsettled fund violation. I use these motifs more for day trading then long term investment.
There are three motifs all depending on your risk tolerance.
Risky
Very Risky
Extremely Risky
Very, Very, Extremely Risky
Bear market is a time to panic according to the media. but actually it's an opportunity to gobble up shares on the downturn,. However, you need a good strategy to do this. You protect your capital and prepare your portfolio by buying shares on the way down because the markets will rebound, they always do.
How do you protect your capital?
Balance portfolio is always key. Half of your portfolio needs to be in bonds. Bonds tend to go up during a bear market and they all have a yield to them. With dividends reinvested, you will keep up gobbling up shares and possibly have steady growth.
When it comes to protecting your capital during a downturn, a DRIP, (Dividend Reinvestment Plan) is key. We all know that the markets will rebound and go higher sooner or later. The key, is to gobble up shares on the way down and the easiest way is with a DRIP plan. It's incredibly important that your Core, where the bulk of your money is invested in, is in a DRIP strategy.
Compounding interest is the most powerful force ever, according to Einstein. That's why my core motifs designed for most investors, to have a yield. I want to gobble up shares on the way down to increase my position as securities become cheaper.
What other investors do during a downturn, they diversify while using a DRIP strategy to gobble up shares on a downturn. If you have large sum portfolio, this isn't a bad strategy. I suggest the following motifs.
Dow Jones Diversified
NASDAQ Diversified
S&P Diversified
US Markets Diversified
US Markets Diversification
Income ETF, 4.6%
For the majority of investors that want to just put money into the market and forget about it, all you will need is one core motif and one bond motif. For active traders, there are a couple of strategies. For all investors, you should be contributing the max to your 401k, contributing the max to your IRA's accounts and and use microsavings apps. You can open IRA accounts with Motif Investing.
When picking a professional broker, make sure to have them show you their results? Either by their own personal portfolio or at least have information regarding their performance. Can they explain how they are investing your money and why?
Who do they have a fiduciary responsibility to? If it's to the firm that employees them and not you, how can you trust them to do what's best for your money and not what is best for their firm? Asking your financial planner who they have a fiduciary responsibility to, is the most important question.
What to run from, if a person or entity wants you to buy their book, web seminar, or program. These guys are modern day snake oil salespeople and they make their money through the sale of their scheme, not from actual investing.
Also watch out for brokers that just have a boilerplate investment plan. This means the brokerage house cares more about getting your money and the commissions, then actually having a long term plan for your portfolio. With the internet being the way trading is done today, there is really no reason why the vast majority of people can't handle their own investments.
Being patient, persistent and constantly educating yourself will pay off in the long run. Remember, the market will not do what you want it to do. If you are an active trader, you need to be flexible to move with the market trends.
Let's talk about Crypto Currencies. The market place is completely over-saturated. It reminds me of the dot com era before the crash of 2000. Everyone and their grandmother had an online business. The stocks became completely overvalued and by 2000 the vast majority of them collapsed. However, out of the dust you got some real winners like Amazon.
There is going to be another Amazon among the Crypto field and if I learned anything, I learn to go where the institutional investors are going. Ethereum seems to have the support of the big boys. With their backing, I believe Ethereum and it's tokens might have longevity. I use Coinbase for my investment firm and only invest very small positions for diversification purposes.
Will Cryptos become a hedge against a bear market? Nobody knows but there is always a chance. As speculators flee the markets during a bear, they could head to Cryptos pushing the currencies up. If the bear market continues, institutional investors could head to Cryptos pushing it even higher.
The news will create new hysteria pushing them up even higher and that's when you sell, if it happens.
If you are not interested in investing in Cryptos but think the technology has a bright future, I made two motifs where investors can invest in the technology and possibly have good returns when it becomes less saturated and more mainstream.
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Medical Marijuana is the craze now and one of the companies will reign supreme like Amazon is the king of dot coms. If this is something that interests you, I have a motif as well.
We all want to make the world a better place. We all wish to see society get better. Many of us donate to charities in the hopes it makes a difference. What if I told you there was a better way? Today, it's very hard to know if your money you donate, actually going to the cause you donated to or going just to pay for the charities administrative cost. Instead of giving to charities, may I suggest you invest in the following motif below. Not only can you help companies and organizations that are trying to make the world a better place raise capital, you can get a return on your investment. A Win, Win.
Investing in Tomorrow
How to tell when you should buy into the markets or prepare for the worse? It always comes down to fundamentals and technical indicators. When traders tell me they don't look at either, I simply say, you might as well burn your money.
The easiest way to see if something has bearish momentum or bull momentum is the 50 day moving average to the 20. If the 20 is above the 50 day, it's bullish and if the 50 is above the 20, it's bearish. If you use this technique you will find places to put your money when other sectors are going bearish. Also this technique should be used to determine if you should buy in or not. Moving averages are your friend and it's important to use them. It's a better investment strategy.
When is it time to buy or short a security? The first thing you will need to look at is charts. The chart needs to go at least six months back. Any chart that doesn't go that far back, doesn't put the moving averages in perspective. Let's say company XYZ is trending up. The first sign of stabilization is when stocks start to trade within their 200 day moving average.
If a security is trading above it's 200 day moving average and within it's 100 day moving average, that means it has support. Trading within its 50 day moving average, means it has legs and once the 20 day is over the 50 day, it's bullish.
If you plan to hold securities for the long term and they pay a dividend, you can simply buy at the market's open. You have the insurance policy. When the 20 day is over the 50 day and the security is within it's MA20, that's a good time to buy in for short term.
If the 20 is over the 50 and the security is within its MA10, you buy in, you going in while the bull run is mid-sail. If the 20 is over the 50 day and the security is trading within its MA5. If you buy in, you are buying in at the tip of the run and that's dangerous.
When a security is trading within its MA5, that's time to take profits off the table. If you missed a bull run, wait for a pull pack before going in. There's always a pull back in any security. If the 50 is over the 20, it means it is time to get out or take profits off the table. If the security is below it's MA200, means it's crashing and you should just wait before going back in.
If your chart is showing downward momentum and the security falls from it's MA5 to MA20. It's time to watch and think about shorting it. If the MA50 goes over the MA20 and the security in trading within it's MA50, shorting it becomes a viable play. When the security falls to it's MA100 to MA200, it's time to look for an exit point.
At the first sign of stabilization, means it's time to end your shorting strategy and think about a bull entry point. Moving averages can tell you exit and entry points. Charts that are six months out can tell you if there is downward or upward momentum. Both are your friends when trading.
The moving averages are always changing daily. Keep an eye on them or you will be left holding a security that has eaten up all your gains plus some. This strategy is based on monthly moving averages.